What are the redemption penalties?
What redemption penalties are there?
The loan may be repaid at any time.
On early settlement you will either be entitled to a rebate of the outstanding
interest as defined by the Consumer credit Act 1974, sometimes known as 'The
Rule of 78', or instead, you may be charged a small interest penalty,
from between zero and 6 months interest
For example, you may have a loan with £5,000 left to pay, and your interest
rate is 10%. If there is an early redemption penalty of 6 months interest
applicable, this means that the penalty would be £250, so you would have to
pay £5,250 to finish the agreement.
Most loans only have a penalty in the first few years.
For the exact
terms applicable to you, refer to your individual credit agreement.
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