Hello all, we’re used to the idea that you can save money by repaying a bank loan early, i.e. you won’t pay interest for those months that you’ve paid off. But our bank Crédit Agricole says no, you pay the interest anyway, even if you pay off all the remaining loan. Does anyone know different ?
These things vary. Read the terms and conditions that you signed when you took out the loan as that is the only place you’ll find accurate information. Don’t forget that CA is regional, so individual branch’s loan terms may differ.
Would make sense given how French banking seems to work. It will be in the small print of the particular agreement you made. If it’s not, check any general terms and conditions you were made aware of before you took out the loan as well.
I do recall some consumer finance having that in the UK.
If it’s not there and you’re unhappy about being charged then if a complaint doesn’t succeed then next step médiateur whose contact details will be in the small print.
I’m sure it depends on the type of loan. For example, assuming it’s a fixed rate loan, was the interest over the term calculated at the beginning and then added to the capital or is the interest applied each month/quarter? My bank rang me up a year ago and offered me a substantial loan (which I didn’t need, but took) at a fixed 1% over five years which I can pay that off at any stage with the interest charges terminating at that point.
“we’re used to the idea”
From my own experiences in various business/financial areas, I’ve learnt not to have any preconceived ideas of “what it’s all about” but to let the French Person explain everything thoroughly and then I’ll read everything very carefully (slowly, slowly)… to check that the Sales Patter matches the documentation and that needs doing before signing…
and, yes. I do know of situations such as you describe… where there is no incentive to pay-up early…
Trust you re-invested that at 5%
No, only 3 to 4, but some is tax free in Livret A
Not sure where your experience is from, but when I tried to pay off my first mortgage in the UK early there was a huge penalty!
Depends on the contract and long ago it was
It all depends, as said, on the loan. Generally though you are right, you pay back all the interest due regardless.
I take out loans for cars where I do not have the vash to purchase, keep the loan in place for a while, pay it off, sell the car and start all over again.
You must bear in mind that a lender is in business to make money. The interest you pay them is their projected income. If you pay the loan early and expect a refund of interest, then the lender’s revenue is suddenly cut short! Not what a shareholder wants to hear
There is specific legislation covering this - I think starting with the Consumer Credit Act 1974
Which includes the right to pay off early with a reduction in interest charges,
Usually a max of 3 months interest is charged, again in the details, my loan I can pay off whenever without penalty. Mortgages once you are outside the fixed/capped/discount and back on the variable you can pay off ( UK.)
Dont feel sad for the lender, the interest they loose from you they gain back re lending the money. Other greedy lenders just get double.
Regardless of how one feels about Lenders…
Reading the small print before signing… is essential… to avoid unpleasant surprises.
HaHa! Not feeling sad for them per se, just want to uphold my meagre shareholding in banks and finance houses
Same for me, I have a BNP Paribas loan / mortgage and wanted to pay if off ages ago but it’s not worth it, I’d have to pay all the interest plus an admin and penalty charge so I just leave the monies I was going to pay it off with in a high interest account and forget about it. Should have, could have, would have looked at the small print if I’d known, but no great loss.
In my simpleton mind I never could understand mortgage and HP principles. I always assumed that if I lent someone 5 quid and they agreed to pay it back at a quid a month for 5 months with an extra quid at the end, that that would be that. I certainly wouldn’t even dream of saying ‘oh by the way, the bank rate has gone up so now you must pay me yet another quid’.
I well remember buying my first, and only, motorbike. I bought it for £50 and paid it off over a year including the agreed interest, and that was that. When I made the last payment I was amazed and outraged that the HP company then demanded another quid. I refused and nothing they could say would shift me. My Dad got involved and explained slowly that I hadn’t been buying it all those months, I had been renting it and now I was required to buy it for £1.
I did give in eventually but not until after a lot of frustration and, it has to be said, patience, from Dad and the HP people.
Completely different animals.
But animals nevertheless, a bit like cats, dogs and terrapins.
Our one and only mortgage in this life was to buy our flat in Nottingham from the council. By sheer good luck we were pointed towards the Halifax who arranged a fixed rate payment per month with an adjustment up or down at the end of each year. I thought it was a bit rich that they could change horses in midstream but accepted that that was the way things were done.
We were unbelievably lucky in that interest rates must have gone down because each year they wanted less, but we never bothered to change it and paid the same amount year after year. When I got my redundancy and we skedaddled here within a week we paid it off and I was slightly saddened and puzzled by the fact that there was more still to pay than I thought there would be.
Thanks folks, i will consult the small print. Not much lost if it isn’t possible.
Was the same for us as I reminded OH about every 6 months as we neared the end of the loan. €1500 + if we ended it early so better off puting savings into another account which nett meant the loan was costing about 1%.