Should the money be returned?
There is no way to return loan proceeds once they have been deposited into your account (or a check has been delivered into your hands). You are a borrower the moment you sign the loan documents. As a result, you’re responsible for adhering to the loan’s terms, including the repayment schedule.
Even if you do not use the loan, the terms and agreement may require you to pay certain fees.
The origination fee
The loan provider may have charged you an origination fee for the work they did on the loan, including checking your credit history.
A lender considers time spent on your loan as work, and most want to be compensated for their time, from checking your credit score to reviewing your repayment options. This helps to explain why some lenders charge an origination fee. Whether you borrowed money from an online lender, a bank, or a credit union, you should be aware of any origination fees.
- Penalty for early payment
- Although the best personal loan lenders do not impose prepayment penalties, many do. Whatever type of loan you choose, the lender is expected to earn a certain interest by receiving payments on time. When a loan is paid off early, the lender loses interest payments. Some lenders charge a prepayment penalty to compensate for the loss. It can be accounted for in one of three ways:
- A set fee
- a portion of the loan balance
- The interest that the lender will lose because you paid off the loan early.
Should you spend the money?
The fact that the unused loan will cost you more to pay back regardless of whether you use it can be enough to persuade you to spend it. That’s fine as long as you make the agreed-upon monthly payments.
Most lenders don’t care what you do with an unsecured personal loan (one that doesn’t require collateral). On the other hand, a debt consolidation loan is an exception because it was granted for a specific purpose. If the lender never inquired about your reason for borrowing money, you should be able to use it however you see fit.
But, once again, only if you make each monthly payment on time. Failure to pay has its own set of consequences, depending on the terms of your loan. As an example:
If you decide that you no longer want or need a loan after receiving the funds, you have two choices:
- Accept the financial hit and repay the loan, as well as the origination and prepayment penalties.
- Use the money for something else, but make each monthly payment on time until the loan is paid off.