You gain financial freedom . When you don't have to pay a creditor, you have free funds that you can put aside. With the help of deposits, you can increase your savings, create a financial cushion, or save up for a large purchase.
Reduce your debt load . When you plan to take out a large loan, it is worth paying off all the small ones first. Then your debt load will decrease and the probability of getting a loan increases. This is a very important point that influences the bank's decision. Even if you can afford large monthly payments, the bank cannot legally issue a loan if the total amount of payments exceeds 50% of your income.
The main risk that comes with paying off a loan early is financial instability and a decrease in living standards. Monthly payments do not hit the budget as hard as a large one-time payment.
If repaying a loan early means you lose your safety net, it's a very tricky move. You may incur unplanned expenses that may require you to take out a new loan.
How to arrange early repayment
To partially close the debt, notify the creditor in advance and find your mobile number database state the amount you intend to pay. You also need to specify how exactly you want to change the terms of the loan - reduce the term or payment. In the first case, the amount of overpayments is reduced, in the second - the burden on the budget. The bank will draw up a new payment schedule, which will come into effect after the write-off date.
If you want to pay off the debt in full, you need to calculate the amount correctly. After you send the notice to the creditor, another month will pass, during which additional interest will be charged. Contact the bank to find out the exact amount on the date of closing the contract.
After the payment is written off, you need to make sure that you really do not owe anything else to the bank. There is a risk of not taking into account fines for late payments, fees for related services - for example, SMS notifications. Ask the bank for a certificate of no debt - it will be sufficient evidence that you have paid in full.