Regardless of the type of loan used, it is possible to pay each loan early and close all debt at once. Banks collect their receivables in advance due to the one-off payment and can, therefore, make some discounts. If consumers know a few simple details, it is possible to calculate how much discount will be made in case of early payment and closing the loan early.
Credit Early Payment Discount
In case consumers close their credit debt early, a decrease will occur in the total debt due to not paying a significant part of the interest that they have to pay. Although the decrease in question seems to be a discount for the consumer, it means that only the interest should be taken for the bank.
Early payment may also require some penalty payment, as it will reduce the bank’s profits and are primarily calculated in the long term. The penalty in question is called an early payment penalty and concerns mortgage users.
Is Insurance Canceled After Early Payment?
Although it is not obligatory as it is known, banks demand life insurance before the loan they will allocate and set it as a prerequisite. Therefore, it is possible for the consumers who have life insurance or a different type of insurance during the term of the loan to cancel their insurance due to paying the loan.
The cancellation in question is solely the responsibility of the consumer and cannot be canceled automatically. The consumer who pays the credit debt early must also apply for the cancellation of the insurance individually, otherwise, there will be no refund regarding the insurance premiums.
But consumers who are satisfied with the privileges of insurance can continue to pay premiums in the same way. This is entirely up to the consumer preference.
How to Calculate Early Payment Discount
How much discount will be made in case of early payment of credit debt is clearly stated in the Consumer Loan Contracts Regulation. Consumers are obliged to pay the interest, tax and other funds that they did not pay until the due date of their early payment. All interest payments in the remaining term are canceled and the principal debt is paid.
For example, a consumer who wants to make an early payment of a 48-month loan in the 20th month will be calculated between the 19th and the 48th months. Early payment is calculated by paying this debt and 20th loan installment at once.
The difference in total debt due to the payment of only the remaining principal debt and the decrease in interest rates is also called a discount since the consumer does not have to pay.
Sample Early Payment Calculation
A consumer who uses consumer loans with a 12-month maturity and 1.28% interest rate has decided to make an early payment while making the 4th installment payment. In this case, in addition to the 4th installment, he will have to pay the remaining principal debt.
The fourth installment amount will be 923 USD, the remaining principal debt is 6902 USD, the total payment to be made is 7.825 USD .
How Much Discount Has Been Made?
A total of 923 USD was paid in installments, that is, a total of 2.769 USD was paid to the bank until the 4th installment. The payment to be made due to early closure was 7925 USD and the bank was paid a total of 10594 USD with the payment of 2759 USD. The amount to be paid normally was 11.081 USD. The difference is 487 USD. In other words, a total of 487 USD discount was made due to the early payment.
We recommend that you read our article by examining our section on the New Supreme Court Decision Regarding the Early Payment Penalty regarding the last decision taken by the Supreme Court on the subject.