“I purchased a stove using a hire purchase plan over 24 months. I got a lump sum in a partner draw and decided to pay it off early. To my surprise, I had to pay more than I had expected to in order to clear off the loan before the scheduled date.

“I think this was very unfair, in fact, I think I should have been rewarded for paying my loan in full before the due date. Can you explain how this is possible?”

When borrowing money it’s very important for consumers to be very clear about all the terms of their loan contract. As we’ve discussed in previous columns, the method of calculating a loan can make a big difference in the amount of your total interest and the monthly payments due.

What many borrowers are not aware of is that some loans contain prepayment clauses that can end up costing you a pretty penny if you decide to pay up earlier than contracted. Continue reading Beware of the Rule of 78s →