May 26, 2015 Are you thinking about paying off your loan early? Read the contract first. There is a chance that the financial institution from which you borrowed money has placed a record in the document that allows you to collect a commission in the event of early repayment. If the bank does not include such a clause, it will not charge an additional fee. Furthermore, in the event of an early repayment of a cash loan, the financial institution should reimburse part of the costs – including commission and insurance premiums. The rest of the text provides information on fees for early mortgage repayments. Enjoy reading!
Early loan repayment without fees
As the name suggests, early repayment of a cash loan is a situation in which we give back part or all of the debt before the date indicated in the contract with the bank. This allows you to save on interest for the period remaining until the day when, according to the repayment schedule, the debt should be formally returned.
This also applies to fees that could arise during this period. The bank must be notified at least 3 days in advance if you want to withdraw your loan before the set date. The financial institution has 14 days to settle the borrower.
A faster return of borrowed money is usually free of charge. This is due to the Consumer Credit Act, in force since December 18, 2011, which says that amounts not exceeding PLN 255,500 may be returned ahead of time without any financial consequences.
Early repayment of cash loans enables a refund of up to 50 percent. commission
According to the interpretation of the Financial Ombudsman and the Office of Competition and Consumer Protection, a borrower who has previously repaid the loan should recover part of the costs. In a situation where the debtor repays the liability in the middle of the loan period, then he should recover a 50% refund. paid commission. However, when the repayment time has been reduced by 20 percent, the bank should pay 20 percent. costs.
Importantly, the borrower cannot recover all fees associated with the loan. Notary fees which are incurred while establishing credit collateral are excluded from the refund.
Financial Ombudsman and UOKiK – financial institutions do not always reimburse costs
The Financial Ombudsman informs that in the period from July 2015 to April 2016, more than 500 complaints were received that related to consumer credit. Over one-fifth of them concerned early repayment of the loan. It turns out that financial institutions often refused to pay back fees and insurance premiums.
The procedure was as follows – the financial institution did not charge any fees for the unused period in the event of early repayment. At the same time, it did not reimburse the fees charged for granting insurance commissions and fees. According to UOKiK and the Financial Ombudsman, such behavior is inconsistent with the Consumer Credit Act.
Both institutions adopted a common position requiring financial institutions to reimburse costs in connection with the earlier settlement of the loan.
Early repayment of cash loan – the bank has the right to charge a commission
Banks can place a provision in the contract that allows you to collect fees for early repayment of the loan. Importantly, the fee is not the same as the commission for granting the financial product. This is a separate cost. Importantly, the creditor must inform the borrower of the clause entered, which gives the possibility to collect additional money for the earlier settlement of the obligation.
The cost of faster repayment is defined by law. If the debt has been settled at least 12 months ahead of schedule, then the commission may not exceed 1 percent. part of the loan repaid. However, when this period does not exceed one year, the fee is 0.5 percent. part of the debt settled.
Early repayment of the mortgage
The Mortgage Act of July 22, 2017 says that the customer has the right to return part or all of the debt at any time. To this end, the borrower should submit an appropriate application to the bank. The financial institution has 7 days to inform the applicant about the costs of the procedure.
Important – in the event of early repayment of a mortgage with a variable interest rate, the bank may collect compensation only in the first three years of the contract. Importantly, the fee may not exceed 3 percent. the adjusted amount.
However, at the time of early repayment of the loan with a fixed interest rate, the bank may charge a commission throughout the entire loan period. As a result, regardless of the date of earlier settlement of the debt, the bank may require a payment. Unfortunately, the Act does not specify its amount precisely. The commission cannot be higher than the costs associated with early repayment.
Early repayment – is it profitable?
It is worth deciding on an earlier repayment in case of rising interest rates – thanks to which you will not have to pay higher installments. Early repayment is beneficial with a relatively large amount to be returned and a repayment period of several years. Due to the fact that the highest interest is accrued in the initial months of repayment of the liability (it is calculated for the current state of debt) and then decreases in favor of the capital part, it is worth considering early repayment as soon as possible. The closer the end of the repayment period, the lower the savings will be.
If you have used the cash loan insurance, remember to send the bank your resignation from this service – you will receive a refund for the remaining payment period according to the repayment schedule.