Must I pay to settle early?

I have a loan with a microlender and wanted to clear my debt with them this month.

My complaint is they are asking me to give them a 3 months notice lest they charge me P9,223 as an early settlement penalty

They are also not paying me anything as insurance refund. Please let me know if this is fair and if there is a way I may find assistance in this matter.

Your anticipated cooperation will be highly appreciated.

I suspect this depends greatly on what it says in the loan agreement you signed with the lender.

There’s nothing illegal about early settlement penalties but the lender MUST have included a warning about them in the agreement you signed, otherwise they can’t do it.

They can’t just make up charges because they feel like doing so.

I suggest that the first thing you should do is find your copy of the loan agreement and see what it says.

Micro-lenders are obliged to give you a copy of the agreement when you take out the loan and even if you’ve lost it they should give you a replacement copy without any fuss.

Then, whether the agreement mentions the settlement penalty or not, call NBFIRA, the Non-Bank Financial Institutions Regulatory Authority, who oversee the micro-lending industry.

Ask them what they think about the fee and the agreement you signed.

You also need to ask about the insurance refund.

My experience is that lenders such as banks do normally offer a partial refund of the insurance fees if you’ve paid any portion of them in advance.

Whatever happens with this lender, it’s critically important that you get a full statement of your account both before and after you settle the debt.

That will confirm that you owe them nothing more. Please let me know how it goes.

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