They are most useful when interest rates are stable. Penalties and charges One drawback of loan refinancing is you might have to pay a fee for early repayment. So check the pre-settlement clause in your loan agreement. The penalty period for loan redemption tends to range from one to five years, and the charge ranges from 1 percent to 1.5 percent on the loan outstanding. This penalty is usually applicable for full redemption.
Most banks tend to waive the penalty charge for partial capital repayment.
If you are well past the penalty period, you might be hit with a conversion fee instead. Many banks will, however, take into account your credit standing and your relationship with them. A representative of UOB Bank, for instance, said in most cases it will agree to a waiver of the fee. SPH AsiaOne Ltd. All rights reserved.