Asking for a loan means obtaining an immediate sum of money to face a pleasure expense, a medical expense or the purchase of a new car for the child. Maybe you want to help a relative in need.
There are many causes that can push you to apply for a loan, but there are other reasons that can lead you to extinguish it before it expires. Let’s take a practical example: you have requested a loan and its repayment has been scheduled in 24 installments. That is in two years.
Money comes, you use it for your purposes
Then the unexpected event: you want to return everything. Because maybe you have cash that allows you to remove this monthly task, or you have found a more advantageous solution and prefer to bet on other loans.
In any case, as this article in La Stampa suggests, it is worthwhile to pay off a debt in advance
It is always convenient because in this way you no longer have to pay interest but there are preferences.
The ideal would be to pay off the debt early, or when you have not yet paid most of the interest. Extinguishing the debt at the end, before the last installments, is not convenient as it may be a closure at the beginning because French depreciation mainly charges the first installments of the debt.
Institutions must obtain as soon as possible the gain, ie the percentage of the interest, and to avoid the losses of the outcome of the debt ahead of time trying to amplify these sums in the early periods of deferral. Over the months the interest rate decreases and so does the convenience of early redemption.
Obviously total extinction is not always possible, but there is also another alternative: the partial balance of the debt . If you do not have the full amount available to pay off the slope, you can still make a good advance and move in two different directions:
- Reduce the number of installments.
- Reduce the sum for each installment.
The concept is simple : the sooner it is extinguished and the more you save. But before taking any action, make sure there are no penalties for early termination. They could be very challenging to deal with.