Can I pay off the loan early?
Yes that works. You can pay off liabilities under a general consumer loan agreement in whole or in part early at any time. It is not necessary to terminate the contract by observing a notice period. In this case, the total cost of the loan is reduced by interest and other loan costs depending on the remaining term of the contract.
This means that, for example, interest on the part of the loan that was repaid early only has to be paid up to the settlement date and not the total amount of interest that would have accrued up to the originally agreed end of the contract.
If the loan is associated with additional costs that depend on the term, these will also be reduced proportionately. These costs include risk or administration costs. This applies to early repayments also for costs incurred when the loan was granted, regardless of the term. These include fees for loan brokerage.
However, since no additional term-independent costs are regularly charged for general consumer loans, the new regulation is more likely to have an impact on certain real estate consumer loans.
Another exception lies in how the credit institution calculates the remaining debt if it has given you notice. In this case, only runtime-dependent costs are reduced.
Will I incur any costs for early redemption or special repayment?
If a general consumer loan for which a fixed interest rate has been agreed is repaid early, in whole or in part, the lender can demand a so-called prepayment penalty. However, the prerequisite is that consumers have been properly informed about this and a corresponding percentage has been agreed upon when the contract is concluded.
The early repayment penalty may not exceed 1 percent of the amount repaid early. If there is only a maximum of 1 year between the early and the agreed repayment, the credit institution may not demand more than 0.5 percent of the repayment amount as early repayment compensation. In no case may the early repayment penalty exceed the amount that would have been paid in interest in the period between the early repayment and the agreed repayment.
This also ensures that no early repayment penalty may be charged if zero percent financing is redeemed early.
An early repayment penalty is also excluded if
- a variable interest rate is agreed,
- the loan from credit insurance is repaid early or
- the lender has provided insufficient information in the contract about the term of the contract, the borrower's right of termination or the calculation of the early repayment penalty.
From the point of view of the consumer advice centers, charging transfer or other processing fees is not permitted.
If you have a right of termination and you exercise this right, the lender is no longer entitled to any early repayment penalty. However, you must then repay the amount owed within two weeks of the termination taking effect. If this does not happen, your termination will be considered invalid. So the contract continues.
What happens if I don't pay installments as scheduled?
With a contract for a free loan, the completed before March 21, 2016 If the borrower's financial situation threatens to deteriorate, the bank can terminate the loan without notice if this endangers the repayment of the loan. If you default on your payments or the institution has terminated your loan, the lender may charge you default interest and other costs. This also applies if the financing was interest-free up to that point.
For contracts that completed as of March 21, 2016 The following applies: The bank can only terminate your contract due to arrears in installments if you are in full or partial default on at least two consecutive installments. At the same time, the backlog must reach a minimum percentage amount, depending on the contract term.
