Can I pay my consumer credit in advance?

November 23, 2019 0 Comment

A good way to reduce the level of indebtedness and increase the ability to pay is to cancel a consumer credit in advance . By performing this operation, we managed to stop paying the lender the interest that generated the amount borrowed.


Can I pay my consumer credit in advance?

Can I pay my consumer credit in advance?

In accordance with article 10 of Law No. 18.010, the client and the creditor have the power to arrange advance payments of credit operations of money greater than 5,000 Development Units (dollars) according to the terms agreed in the contract.

However, in the case of obligations below that figure, debtors have the inalienable right to prepay the obligation even against the will of the creditor, provided that certain conditions and collections are met.


Does it cost to pay in advance?

credit payment

Although it is a right, the procedure entails certain requirements and the collection of a commission. The Securities and Insurance Superintendence sets the following norm:

  • In non-adjustable operations : the debtor must pay the anticipated capital and the amount of the interest agreed until the date of the effective payment, plus a prepaid commission, which cannot exceed the value of one month of interest calculated on the prepaid capital
  • In resettable operations : the debtor must cancel the updated capital that is anticipated plus the agreed interest calculated at the effective payment date. As in the previous point, you must also assume the payment of a prepaid commission, which cannot exceed the value of a month and a half of interest calculated on prepaid capital.

However, in cases where the amount of the advance payment is less than 25% of the balance of the obligation, no advance payment can be made without the creditor’s consent.

The procedure is as simple as possible. It is enough to make the bank the formal request for consumer credit in advance and wait for it to issue a certificate for debt settlement. This, in accordance with point 3.1 of SBIF Circular Nº3.511, must contain, among other information, the exact amount to be paid during the ten business days following the issuance of the document.

Once the client receives the settlement certificate, he can proceed to make the payment.


How to calculate the prepayment of a consumer credit

credit payment

Taking into account the above, we can establish the following formula to settle the prepaid:

Prepaid = Capital owed + Interest at the date of prepayment + prepaid commission.

To exemplify, let’s imagine that I am going to pay an advance consumer loan in the 12th month, the amount of which was 10,000,000 million dollars, at 24 months and with an effective annual interest rate of 21%.

The payment terms would be:

  • 5,518,592 dollars = capital owed.
  • 0 dollars = interest accrued at the prepaid date, assuming that I am going to pay the same day that I pay the fees and that the financial entity has been charging me the agreed interest month by month.
  • 96,575 dollars = prepaid commission.

All this calculation is carried out by the financial institution at the time of paying off the debt. In addition, the SBIF and some banks offer online prepaid consumer credit calculators that deliver accurate results.

Before requesting a consumer credit, it is important to consult about the conditions and possibilities that the financial entity provides. In this way we can make duly informed decisions.