Banks abolish early loan repayment penalties

The UBA’s executive director, Wilbrod Owor, revealed that this resolution was reached during the CEO’s meeting held on Friday, October 13, 2023.

The new resolution means that borrowers cannot be penalised for clearing their loans early, as had been the case. UBA dropped the charges that one has to pay for clearing the loan early.

UBA’s head said the resolution was reached during the meeting following concerns that were raised during a meeting with the Governor Bank of Uganda and said that the regulator will be informed about the decision made. It was also agreed that banks should inform their customers of the changes.

“This correspondence serves to notify you that at our monthly CEOs meeting held on Friday, October 13, 2023, a decision was reached to drop or abolish the practice of early loan repayment fees charged on outstanding loans across our membership and industry,” Owor said.

Early repayment charges are usually calculated as a percentage of the amount still outstanding on one’s loan, usually between 1 and 5%.

This charge is based on the loan amount charged. The amount is equal to 58 days’ interest on the amount one repays early and the actual number of days remaining.

A section of Ugandans had earlier complained about the penalties, saying it was unfair that banks were penalising people for paying off their loans early enough, yet it should serve as a good way of doing things.