Interest on full repayment of loan?

[Karlito]

I have a balance of €17,800 on my loan. I have enough to pay it outright but CU said that I have to pay €1,900 interest on top of that if I pay outright.

I didn’t think anything of it but a few folks told me that seems odd and that they had payed off loans with lump sums and didn’t have to pay any interest.

Is this right/standard practice?

 

[jpd]

Depends on the original terms of the loan - so interest could be due

 

[Brendan Burgess]

Sounds wrong the way you say it, but I suspect that you have misunderstood something.

Every Irish credit union makes a big deal that they allow people to repay the loan at any time without penalty. ( It's not a big deal because it is illegal to charge a penalty on a variable rate loan!)

Is there any possibility that your Credit Union has issued you with a fixed rate loan? I didn't think that they did. Is it a mortgage? Some do fixed rate mortgages?

Have you a statement from them either online or in paper?

Is it possible that they have not yet applied the interest to the loan? But that would be 10.5% which is high even by the Credit Union's very high interest rates.

Brendan

 

[Salvadore]

Every Irish credit union makes a big deal that they allow people to repay the loan at any time without penalty. ( It's not a big deal because it is illegal to charge a penalty on a variable rate loan!)

So does the same go for variable rate loans from banks? It’s possible to increase repayments and save on interest?

 

[Brendan Burgess]

You can overpay a variable rate mortgage at any time, without penalty.

I am not sure if there is a legal ban on non-mortgage loans. But I think it's the practice not to charge. If you are asking about a non-mortgage loan, check the documentation.