Revolving credit is a relatively easy to obtain small loan, with an APR rate higher than that of conventional credit. The partial or total repayment of a revolving credit therefore makes it possible in certain cases to avoid paying a lot of interest. It is mostly done without penalties or fees. Let’s look at how to go about settling this type of loan.
Why pay back a revolving credit?
Revolving credit is generally a small credit, easier to obtain than a conventional credit. Its ease of access sometimes hides a high APR rate. Partially or fully repaying its revolving credit reduces or eliminates the remaining interest due, resulting in a reduction of its total cost.
A large cash inflow can lead to the good idea of partially or fully repaying a revolving credit in progress. To do this, simply send a registered letter to the lending institution, invoking article L312-34 of the consumer code. No penalty can be claimed in the event of early repayment of a revolving credit.
Standard letter for early repayment of revolving credit
I signed, on (date), a credit contract registered with the following references (contract references).
I inform you of my intention to prepay all of this credit, in accordance with the provisions of article L. 312-34 of the consumer code. All of the due monthly payments have already been paid.
You will find attached a check in the amount of (…) USD, corresponding to the balance of the remaining monthly payments.
Please accept, Madam, Sir, the expression of my best regards.
Revolving credit at a glance
Revolving credit grants a sum of money. This reserve is renewed with the reimbursements, and can be used instantly. Here are the main concepts to know about revolving credit:
- Its APR rate is revisable and not fixed, indicating that it is likely to change if the available money is reused.
- A revolving credit contract can be opened in store, in the case of an instant purchase with loyalty and payment card (see store credit).
- Credit organizations and banks offer “classic” revolving credit, granting a sum of money and a basic reserve.
- The duration of repayment of a revolving credit cannot exceed 36 months for a credit 3000 $, 60 months beyond.
- Finally, the early repayment of a revolving credit is always made without penalties.