In this blog post, we offer some information about making extra payments on a debt you owe.
If you decide to make extra payments on debts you owe, know that the law in British Columbia gives you the right to do so. The consumer law that we are responsible for, the Business Practices and Consumer Protection Act, has a section that speaks to the “Prepayment of credit” – you can read that section here.
Except for a mortgage, you can always pay off, or make extra payments, on a debt you owe penalty-free. The amount you pay is entirely up to you: it can be all the debt, or just a portion of it. When you make additional payments, the creditor cannot charge you fees to process the payment or issue you a penalty for paying early.
Also, if you prepaid for an optional service on the debt (such as life insurance), you are entitled to a refund of the amount that is no longer required because of the additional payment.
Making extra payments on a debt not only result in the debt being paid off sooner, but it also saves you interest costs.
We hope this information was helpful!
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2 thoughts on “Tips when paying down a debt”
Hi Linda — Thanks for your question. I couldn’t say for certain whether or not the creditor would charge you back interest, as this is a different kind or arrangement (i.e., it sounds like you’re paying in arrears and to a third-party, the debt repayment company, an not the creditor itself). What I can say is this is a matter of contract between you and the debt repayment company. Take a close read of your contract to find out the terms and conditions you agreed to, including the payment terms and the interest rate.
Also, I’m not sure if you’re working with a debt pooler (which are required to be licensed and follow certain rules) or a debt settler (which are, as of now, unregulated). While debt settlement companies are not yet regulated in BC, government has announced new laws that will come into effect soon. Here’s some information about that: http://www2.news.gov.bc.ca/news_releases_2013-2017/2015JAG0038-000265.htm
I hope this was helpful!
I have been repaying credit card debt for several years to a debt repayment company. I have been told that if I pay more than the monthly payment, the creators will charge all the back interest they have reduced through the program. Is this accurate? I am paying lower interest, but this has not been as low as advertised.