Advance repayment of loans — this is a quick and effective way of alleviating the debt burden and making your money more profitable. But do you know that early repayment really saves you money

What's the cost of early repayment

Let us start with the two main types of loans: the principal equivalent and the principal equivalent. The repayment of the equivalent principal method gradually reduces interest as our monthly principal repayments remain unchanged. Such an approach would be extremely economical when you considered early repayment of the loan, as you would return more principal and reduce interest expenditure. The equivalent principal repayment method, on the other hand, is equivalent to the amount reimbursed per month, while interest is the largest in the early repayments. While earlier repayments may reduce the burden of interest, you must be careful in choosing which way to pay the loan earlier。

You may see that the interest that you have paid and cannot be returned under the equivalent principal is higher than the equivalent principal. So, if you intend to pay in advance from the beginning and the loan term is not long, then the equivalent of the principal is the best option。

What are the conditions for early repayment

1. In order to apply for an early partial or full repayment of the loan for the first time, you must ensure that the principal of the loan is repaid in full by six months or one year per month。

2. You must notify the lending institution at least 10 or 15 days in advance of your intention to repay the loan in advance。

3. Some banks will require you to pay up no less than $10,000 in advance and accept only a few times the amount of $10,000 in whole。

After early repayment of a part of the mortgage, you can choose to shorten the repayment period. That way, you can lighten the burden every month。