Do all lenders have an early repayment charge?
April 16 2024
April 16 2024
An early repayment charge (ERC) is a fee which some lenders may charge when borrowers settle their loans before the agreed term ends. The reason that some lenders make this charge is to compensate themselves for the interest they would have earned if the borrower had continued making payments as scheduled.
The question of whether lenders have an early repayment charge is a common one amongst borrowers exploring their loan options. While not all lenders enforce this charge, it is very common in the lending industry. ERCs can vary in amount, with some lenders imposing a flat fee and others charging a percentage of the remaining balance.
The rules around ERCs that lenders can charge vary between secured loans, like mortgages, and unsecured loans. For unsecured loans, the amount must not exceed either 1% of the settlement figure (or 0.5% if the loan is settled with the first 12 months) or the total amount of interest that would have been payable without early repayment.
It’s essential for borrowers to carefully review the terms and conditions of any loan agreement to understand potential fees or charges, including early repayment charges. By conducting due diligence, borrowers can make informed decisions and avoid unexpected costs.
Here at Lendology CIC, transparency and flexibility are at the core of our lending philosophy. Unlike some lenders, we believe in empowering borrowers by offering loans without imposing early repayment charges. That means you have the freedom to pay off your loan in full or in part at any time, without incurring any penalties.
We understand that financial circumstances can change, and we want to support you every step of the way. Whether you’re looking to settle your loan ahead of schedule or make lump sum reductions to reduce your outstanding balance, we’re here to accommodate your needs.
If you’re considering homeowner loans for property repairs or adaptations, our flexible loan options might be able to help.
