# Paying off a loan early:  Fixed rate vs variable rate?



## Bearty (2 Sep 2008)

Hi, 

My partner needs to apply for a personal loan and we are wondering what is the difference between fixed and variable rates when it comes to paying off the loan early? More specifically, I know most fixed rate loans charge a penalty for early repayment, is this the case with variable loans also?

Also, has anyone any ideas about Rabo's credit account? Would this be more suitable (i.e. could he avoid penalties for early repayment etc ?).  Loan will be approx 13K over 3 yrs (but hopefully cleared before then!).


Thanks


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## ClubMan (2 Sep 2008)

Bearty said:


> what is the difference between fixed and variable rates when it comes to paying off the loan early?


Fixed rate loans will often charge a penalty for early redemption. Check your loan agreement terms & conditions for details.


> More specifically, I know most fixed rate loans charge a penalty for early repayment, is this the case with variable loans also?


Not normally. Certainly not on an owner occupier variable rate mortgage since it is illegal.


> Also, has anyone any ideas about Rabo's credit account? Would this be more suitable (i.e. could he avoid penalties for early repayment etc ?).  Loan will be approx 13K over 3 yrs (but hopefully cleared before then!).


More suitable than what?


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## Bearty (2 Sep 2008)

It is an unsecured personal loan (so nothing to do with our home or mortgage).  

Would Rabo credit account be more suitable should a variable personal loan (or indeed fixed personal loan) would warrant a penalty for early repayment?


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## ClubMan (2 Sep 2008)

Bearty said:


> It is an unsecured personal loan (so nothing to do with our home or mortgage).


Check the T&Cs for details of any charges that might apply on early redemption.


> Would Rabo credit account be more suitable should a variable personal loan (or indeed fixed personal loan) would warrant a penalty for early repayment?


You'd need to crunch the numbers to compare these two or other options.


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## Satanta (2 Sep 2008)

This key post and this thread on fixed rate personl loans without redemption penalties might be of interest. The key post also provides a link to discussions of the Rabo account which you might find of some help.


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## newbuild05 (4 Sep 2008)

Just a quick query on paying off your loan early. We got a loan last Niovember and have now paid it off early. We were charged a penalty which was ok because we knew we would have to pay that but what we didnt know is that the money we paid into the loan 2 thirds of it went on interest?? We paid back roughly €3,600 but had only paid €1,100 off the loan.
i have had a quick look through the terms and conditions but i see nothing on this. The loan was with halifax and it seems they added all the interest at the start so effectively we were paying back from there and not on what we had borrowed. 

Does anyone know if this is correct

i will have a proper look at the terms and conditions tonight.


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## ClubMan (4 Sep 2008)

What were the terms & conditions of the loan - e.g. amount, term, rate, rate type and what penalties applied for early redemption?


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## newbuild05 (4 Sep 2008)

ClubMan said:


> What were the terms & conditions of the loan - e.g. amount, term, rate, rate type and what penalties applied for early redemption?


 
Hi clubman 
lona amount 20,000, fixed rate 5 year pay back and 90 days interest payable if redemed early. Can t remember the exact rate think it was about 8%.


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