Partial early repayment is a method used recently by more and more Romanians who have dared to take a bank loan to buy a house.

Basically, they borrow more money to immediately return some of it to the bank to reduce the term of the loan and, implicitly, the interest and fees.

Iryna Citsu, financial analyst and director of Finzoom.ro, a portal that compares products of Romanian banks, explains to us why it is better to choose the first option and what are the advantages of early repayment.

From the very beginning, we must understand that partial early repayment is carried out only at the client’s request. Even if we can repay any amount of money in advance, at any time, choosing either a reduction of the period or a monthly rate, the most effective is to reduce the term of credit.

“Partial early repayment is most effective if it is carried out especially at the beginning of the loan,” explains Iryna Chitsu, giving such an example.

If, for example, we get a mortgage loan for 250,000 lei for 20 years and make a partial early repayment of 30,000 lei the next day, the term of the loan is reduced by four years and six months. Thus, instead of 20 years, we pay for 15 years and 4 months a loan that would normally be paid for 20 years. In addition, we manage to save during this time 84,820.45 lei, money that would represent interest and fees paid to the bank.

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