An overpayment is a payment that is made in addition to the agreed regular repayment (e.g. the monthly rates) of a loan or mortgage. It can be a partial repayment (overpayment) or full repayment of the outstanding loan amount.
Overpayments usually reduce the term of the loan and are therefore a good way of repaying a loan more quickly, thus saving interest costs.
The reason for potential savings: interest is calculated based on how much of the loan amount has not yet been repaid. If this outstanding amount declines, the interest costs also declines.
Some lenders only allow unscheduled repayments with restrictions in order to protect their interest income. These restrictions may relate to the frequency or amount of the repayment or can even be an extra early repayment charge (ERC). This charge is intended to compensate the lender for the loss resulting from the early repayment of the loan. If a fee or "early repayment charge" is incurred, you should calculate and compare the amount of the fee and the interest savings precisely.
Important note for consumer loans:
Switzerland's Consumer Credit Act (KKG) stipulates that early repayment of a consumer loan is possible at any time. At LEND, early repayment of personal loans is always free of charge. Further information can be found in the fee schedule.