Some lending companies have an early repayment penalty that will be charged when a borrower pays back the loan earlier than the agreed term. And these penalties should be avoided by the borrower.

Many people believe that it is a good idea to pay back in full the amount that they have loaned. Paying the loaned amount may mean that the interest can be avoided. Unfortunately, some lending agencies have set up a system in which the borrowers who pay earlier will still be able to pay the interest. This system is in the form of the early repayment penalty.

How much is the early repayment penalty?

When the borrower is charged with an early repayment penalty, he is not really reducing the amount that he has loaned. A loan which is paid earlier may not be lesser than the amount that the borrower will pay if he has followed the loan term.

This early repayment penalty is usually equal to one or two month