Receiving a bank loan or a loan from non-bank companies is a positive injection of cash for people who applied for it. There are situations, however, that it may be terminated during the term of the contract. When and under what circumstances does it occur? What are the consequences of terminating the loan agreement? We answered these questions in the article below.
What is the termination of the loan agreement?
Bank loans are regulated by the Consumer Credit Act, so all steps that are carried out by banking institutions are reflected in the above-mentioned Act. Each loan agreement or loan agreement protects 2 parties, ie the lender and the borrower, against failure to comply with the points contained in the signed agreement.
If one of the parties improperly performs elements of the contract, it may be terminated. In practice, this means that the person who took out the loan will have to return to the bank the remaining part of the cash from the loan. The lender, in this case the bank sets the date when the refund is expected – usually it is a month. Anyone who has received information about a return should respond to it and in the case ignore it.
In which case can the loan be canceled?
Are you wondering when a bank can terminate a loan agreement? One of the reasons is the lack of timely repayment by the client. When we are in arrears with a repayment period of at least 2 months, we can get a letter from the bank terminating the loan agreement. Another reason could be misleading a banking institution when we provided information about our earnings. If we lied to the bank about our salary or other details needed to receive a loan, we can expect an unpleasant letter from the lender. If we have not insured the loan in the event of loss of our income, this situation may also cause the bank to terminate the loan agreement. Lack of creditworthiness of the consumer is a big hurdle in paying the installment and exposes the bank to great risk.
Real estate is our collateral for mortgages. If its value decreases significantly and it is no longer a valuable collateral for the loan taken, the bank may terminate the loan agreement. The last reason is the fact that we have not allocated the money to what we have declared. If we take a loan, eg for the purchase of an apartment, and the money is spent on holidays and travel, in short, we’ve misled the bank. A clear scam that may be punishable by cancellation of the loan agreement.
Termination of the loan agreement – what are the consequences?
The worst effect of terminating the loan agreement is paying the remainder within a month. Borrowers who do not pay their installments on time often have financial problems and it is practically impossible to pay off the rest of the installments in such a short time. Before we receive a decision to terminate the loan agreement, the banking institution sends letters by post in which it requests repayment from the debtor on time. If he ignores the case, he goes to the debt collection department. Those who have had or are dealing with it know that this is not pleasant. And even worse situation is when the case is taken over by a bailiff, because debt collection failed to convince the client to pay the debts. Bailiff acting on a court order to carry out bailiff enforcement. He can take over our salary, flat and even money from a pension.
Normally, after the loan agreement has been terminated, the debtor has a month to repay it. But this deadline may be extended depending on the individual assessment of the bank.
Can I withdraw from the loan agreement?
The borrower also has the right to withdraw from the loan agreement. The downside of this is that we still have to give back to the bank what we have borrowed, and the plus is that the creditor cannot charge us interest for the remaining time. Termination of the loan agreement is not a simple act because one of the parties must break the rules described in the agreement. As a serious institution, the bank is unlikely to afford to break even the smallest point in the contract. However, if we notice that the bank’s actions are inappropriate as to the provisions of the agreement, we have the right to cancel the loan agreement.
Loan repayment ahead of time
The lender can repay the loan in full ahead of time that is on the contract and exactly in the repayment schedule. He doesn’t have to explain it to anyone. If we have a sudden surge of cash that is enough to pay off the commitment, we can do it. It is a good enough solution because a person who repays the loan ahead of time should be exempt from additional fees such as interest.
Such a simple matter is not the case with mortgages. If we want to repay the liability ahead of time, eg during the first 36 months, we must take into account the additional fee for repayment of the loan before the set deadline.