Customers have the right to settle some or all of the credit agreement (“early settlement”) at any time. This might lead to a rebate in the interest the customer owes and therefore a reduction in the total cost of credit.
There is no minimum early settlement amount or maximum number of partial early payments which may be made.
Where the amount of the early repayment exceeds £8,000, lenders are entitled to compensation for costs provided that such repayment falls within a period for which the borrowing rate is fixed. The compensation cannot exceed 1% of the amount repaid early, or 0.5% if the outstanding period of the loan is less than one year. Lenders must disclose the early settlement compensation to the customer in both the pre-contract information and the actual credit agreement.