However good the APR looks on a loan, it’s always worth checking what happens if you want to pay back your loan early. There’s no point being saddled with debt longer than you need to be – but you can face a hefty fee if you repay before the term is up.
While stricter measures were introduced in 2005 reducing the amount a loan provider can chage in the event of early repayment, you will more than likely still be subjected to a month or even two of interest beyond the date you repay. So effectively, you’ll be paying interest on money that you have already paid back. The earlier you repay, the bigger the fee will be.
Even if you don’t plan to repay early, it’s always worth checking with a provider what they would charge you. Rates might come down elsewhere so that you find a better deal, or you might decide to switch the debt to a 0% credit card – so make sure this wouldn’t end up being costly.
The only providers who don’t charge any early repayment fees are Zopa and the Post Office.