When signing the loan agreement, the borrower and the lender set the date of repayment and payment dates for subsequent installments. However, the law allows customers to repay cash loans early. When will it be possible?
Consumer Credit Act reserves to borrowers the right to early total or partial repayment of the loan. This may necessitate the payment of compensation to the bank, but it opens the way to reducing the cost of lending.
Does early repayment cost?
The law reserves consumers the option of early repayment, and the bank cannot make acceptance of such repayment required for the customer to inform him of his intentions earlier. However, you should be aware that in such a situation the bank may charge a commission to compensate for the loan interest lost as a result of earlier commitment. This provides the lender with art. 50 of the Consumer Credit Act.
How much compensation will the bank pay?
The bank should specify the amount of these fees in the loan agreement. They may not be higher than those indicated in the Consumer Credit Act. In addition, the commission may be charged if the loan is repaid over a period in which the interest rate is fixed and the amount repaid in the last 12 months of the loan is higher than 3 times the average salary in the enterprise sector.
The commission for early, full or partial repayment of the loan cannot be higher than the interest that the borrower would pay to the bank in the period between the loan repayment before the agreed date and the agreed end date.
The amount of compensation for the bank may not exceed the sum of the direct costs incurred by the lender in connection with the earlier repayment of the loan. The Act on consumer credit indicates that the commission cannot be higher than:
- 1 percent part of the loan repaid if the period between the loan repayment date and the repayment date exceeds one year;
- 0.5% part of the loan repaid, if the period between the loan repayment date and the repayment date does not exceed one year.
If these conditions are not met, the bank will not be able to collect its commission and make up for lost interest.
Reimbursement of a part of costs for the customer
An earlier return of the loan to the bank not only frees the client from debt, but also allows you to apply for a reimbursement of part of the costs incurred. Faced with repayment of the entire loan, banks are required to reduce the total cost of lending by the costs of the period by which the duration of the loan agreement was shortened. This happens even if the borrower incurred them before the loan was repaid in full.