Can I Reduce my Loan Charges?

If you have loans, then you will be paying charges for them. It could be that you will be paying interest on them and there might be fees as well or instead. This means that you will need to think about whether there is any way that you can reduce these costs. There are a few things that you could try out.

Switch to a cheaper lender

It is worth hunting around to see whether you can switch to a cheaper lender. It might be possible for you to take out another loan, use that to pay off what you owe and then you will have to repay the alternative lender. You will need to check this out carefully though. Firstly, you might find that you have a fee to pay if you pay off the loan early. This is called an early redemption fee. Some lenders will have on and some will not. Some will be a small amount and so will be very large. It is well worth checking with your lender as to whether there is such a fee so that you can decide if it is worth repaying it early. It is wise to calculate how much you will be paying in interest if you keep the loan and how much the fee is. If the fee is more than the total interest you are paying it is best to keep the loan and repay it as agreed. However, if the fee is less, you will need to calculate how much the alternative loan you are thinking of switching to will cost and then work out whether it will be cheaper to switch. This sounds complicated but it is not, just ask each lender how much the loan will cost and ask your current lender which the early redemption fee, they will do all the hard work and you will just need to compare the figures.

Repay some of what you owe

If there is no early redemption fee or it is very small, then it is worth repaying some of the loan early. If you can put, even just a small extra amount, against the loan each month it will get the costs down. As you repay more and more, you will be charged less and less interest so the loan will be costing you less money. As you repay more and more, the interest will keep reducing and this will enable you to be able to repay more of the balance with the money that you would have been using to pay the interest.

Choose a lender wisely

If you are choosing a new lender then you should be careful to carefully compare the rates of various lenders so that you choose the cheapest one. This will keep your loan costs down. However, it is good to also see whether it is a flexible loan where you can make overpayments. This will be in your advantage as you will be able to repay the loan early and make it cheaper. So, check this before taking out the loan and this should help. If the loan is one that can be repayments with no fee or a very small one, then make sure, that during the course of the loan, you keep comparing the costs to make sure that there is not a cheaper one that you can switch to. It is a good idea to do this every six months to a year so that you can be completely sure that you are neve paying more than completely necessary. Do make sure that there are no fees for taking out a loan as well as repaying on early as these costs could make it more expensive to swap lenders than stay with your current one.

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