In the current context, with very low interest rates, or even negative in some cases, few people consider repaying their credit. Interest rates have generally declined as the Euribor rate continues to fall and banks are applying lower spreads. But does this really mean that you don’t have to think about depreciation?
If you have any money available to apply and have a mortgage
you should always consider repaying the debt. At the risk, return and tax level, amortization is probably the best investment you can make. Plus, it’s something that will make you feel a little more relieved every month. However, you should consider a number of factors before you perform whether amortization will be beneficial to you or not.
Consider, first of all, that this option to repay an extra amount to your monthly installment is not free of charge, and there is always an amortization commission that will be charged by the bank. To understand if amortization makes sense to you, you need to consider these cartoons that you will have to pay the bank and the decrease you will make in the amount of your monthly installment. Only by calculating both will you be able to see if this option pays off or not.
On the other hand, you should also be aware that when you enter into a variable rate home loan contract, the commission may not exceed 0.5%, but with a fixed rate, the commission may reach 2%, therefore more expensive. Find out here what are the main differences between these two rates. The client is exempt from this commission only when the repayment is made on the grounds of unemployment, professional travel or death of one of the loan holders.
Credit repayment advantages
However, even with this commission, repaying credit has some important advantages, such as: being more relaxed knowing that you no longer have debt; pay a lower monthly installment; shorten the debt repayment term and get connoted as “good payer”. This last advantage is especially useful in the future if you want to apply for another credit, in which case banking institutions will have an enhanced security in them.
However, it should be noted that you should not amortize your credit as a rule if your credit APR is very low (less than 2%), if there is a possibility of capitalizing savings at higher rates if you do not have a loan fund. solid emergency or anticipate needing to apply for another credit if you apply this money to amortization.
If, after considering all these situations, it is still beneficial to repay your credit, you should not hesitate to choose this option. In this way you can actually save hundreds of euros every month by carrying a smaller debt.