Early repayment of a loan is a step that thousands of consumers decide each year. Of course, their reasons for making this decision can be very diverse, but the benefits can be determined in a global way. We check what it is connected to, apart from breaking the yoke of credit.

When taking a cash loan and a mortgage loan, the borrower agrees to the terms agreed with the bank – as well as those related to the date of repayment, the amount of installments and the method of their calculation. But besides early repayment, we are entitled to refund the bank’s commission . So it is worth taking advantage of this opportunity! We suggest how to do this.

Early repayment of the mortgage – what should you know?

Obtaining a loan to buy your dream home or apartment is a very time consuming procedure and involves many procedures. However, when all the necessary actions are successfully completed, the goal is achieved, the price of which is the need to include in monthly expenses a fixed cost for the coming years – that is, loan installments.

Although all conditions, including the main criteria for the amount of the loan, the number of installments or their amounts, are included in the contract, this does not mean, however, that the customer does not have the right to accelerate the repayment of obligations – and, accordingly, reduce the number of future installments. In accordance with the provisions of the Mortgage Loan Law issued on March 23, 2017 , the customer has the right to early repay the obligation at any time during its term .

Moreover, in accordance with the above-mentioned law, the client, if he wants to apply to the bank for expedited repayment of obligations, must receive from the bank within 7 days comprehensive information on the rules and procedures for accelerated repayment of a mortgage loan. . The Bank is also obligated to return the interest to us for the next period covered by the expedited payment.

It is worth making sure that we do not pay extra fees for early repayment of the housing loan. Banks are entitled to collect up to 3% of the amount paid within 3 years of signing the contract.

Consumer loan and early repayment by law

A consumer loan is understood as a liability whose amount does not exceed 255,550 PLN (or its equivalent in a foreign currency). It is also an unsecured loan with a mortgage entry that finances the renovation of a house or apartment – and then this obligation may exceed the above amount and meet the terms of the consumer loan agreement.

So, the role of a consumer loan is played, for example:

According to art. 48 of the Consumer Credit Code, the customer has the right to early repayment of the loan:

1. The consumer has the right to repay the whole or part of the loan at any time before the date specified in the contract.

2. The creditor may not make early repayment of the loan based on his notification by the consumer.

Along with early repayment of the loan, the consumer gains the right to reclaim the bank’s commission . The exact rules are set out in Article 49 of the Consumer Credit Act:

In the event that the entire loan is repaid before the deadline specified in the contract, the total cost of the loan is reduced by the costs related to the period during which the term of the contract was shortened, even if the consumer incurred them ahead of schedule. reimbursement.

Most importantly, according to Art. 52 UKK, the bank is obligated to settle accounts with the customer within 14 days of early repayment of the loan.

Is early repayment of a cash loan worthwhile?

In the case of a cash loan, the loan is accompanied by less extensive procedures – after all, it is based on significantly smaller amounts and a shorter repayment period. Also called depreciation, it is finally incurred for less expensive expenses, such as a renewal or a vacation trip. Apart from that, in the case of cash loans also, the customer has the right to demand faster repayment .

As in the case of the above-mentioned mortgage loans, as well as in the case of cash loans, the accelerated repayment is clearly indicated in the regulations. The right to such a solution is guaranteed by the Consumer Credit Act of May 12, 2011, which discusses the general principles of making obligations up to the amount of 255 thousand PLN, which are received by natural persons (not entrepreneurs). We can read about accelerated payment in Article 48.

What rights does the consumer have in relation to the said law?

• He may decide to pay off the loan faster at any time during his repayment.
• The bank cannot refuse at the customer’s request.
• The Customer may, but is not required to, indicate this intention to the Bank in advance.
• There are no contraindications to charging for such a procedure – so it is worth checking the terms of the contract with the bank before settling the liability – in order to avoid possible fees.

How does a prepaid mortgage work?

Every borrower who commits to a mortgage knows very well how time consuming this process can be. So it should come as no surprise that early cancellation of a long-term, high-value commitment will also require the consumer to be patient to take some necessary action. What are we talking about exactly?

1. Be sure of the rules about the costs of early repayment of the loan that apply to your situation, the so-called whether you have a fixed or variable interest rate, and whether the loan is repaid for a period of more or less than 3 months.
2. Consider which method of quick repayment of the loan will be more convenient for you – overpayment, in the form of an increase in the monthly installment for faster settlement, or immediate repayment of all the remaining capital in one amount.
3. Submit to the bank with a request for complete information on the current loan repayment status, with the amount repaid to date, as well as with outstanding debts.
4. In addition, it will be necessary to require the bank to provide comprehensive information on the costs and procedures for early repayment of the loan.
5. Send the application with the loan repayment request to the bank, then arrange a visit with the consultant to complete all the necessary procedures.

attention! The bank has the right to charge a fee for early mortgage repayment within 3 years of signing the contract. The commission for early repayment is up to 3%, but some banks have abandoned collecting it.

How does early repayment of cash loan work?

Early repayment of a cash loan is based on the same scheme as in the case of a mortgage obligation. Before the door handle “falls” and we decide to inform the bank, it is worth getting acquainted with the details of the course of this procedure.

1. Contact the customer service desk of the bank, identify yourself and submit your intention to pay off the loan faster
2. Decide how and when you want to settle the commitment early.
3. Give the bank accelerated loan repayment instructions.
4. Quickly pay off the obligation by overpaying all principal remaining to date in the manner prescribed by the Bank.
5. Can you pay off the loan faster but not up front? Pay extra monthly installments, agreeing with the bank to increase the monthly installments so that the debt is settled faster.

Bank commission refund in case of early payment

When discussing the accelerated repayment of a loan, it is impossible not to mention the issue of additional costs that were included in the original composition. Assuming that the client will repay the loan within the initially specified period, he pays the installments according to the described rules.

In the event that a quick repayment of the loan is desired, the consumer returns the outstanding principal faster. At the same time, the interest part of the previously paid amount must be returned to the customer – especially in the case of a cash loan. After all, it’s a fee for the period in which the repayment eventually fails.

This issue raised a fierce debate in the field of cooperation between banks and customers. However, in her case, pro-consumer positions were taken by important authorities, including the Court of Justice of the European Union or the Financial Ombudsman at the Office of Competition and Consumer Protection.

When it comes to repayment, it is also worth considering the issue of interest . Consumers who make early mortgage payments are also interested in this issue, but it is difficult to point out clear rules here.

Banks charge interest in different ways – sometimes it is part of the installments from the initial stage of loan repayment, so we may not be entitled to a refund anymore. In other cases, the banks also include the interest on the installments at a later time, which, in turn, should logically give the right to return it for the unused period. Therefore, it is worth taking a closer look at the contract and the structure of all the fees that increase the monthly installment in addition to the repayment of the capital itself .

Bank commission payment request – the most important information

• Claim for reimbursement of commission expires after 10 years to make payments by July 8, 2018. We have 6 years to apply for liability incurred after this date, before the right to reimbursement expires.
• The bank has 30 days to consider the submitted application. If the customer does not receive the bank’s decision within this time, he has the right to take the matter to court.
• In the event of a negative response from the bank, the customer has the right to file a complaint. In this step, it is worth noting the position of the Financial Ombudsman and Head of the Office of Competition and Consumer Protection on the interpretation of art. 49 of the Consumer Credit Act [ link ]
• In the application, it should be noted all credit costs that we expect to be reimbursed, including the appropriate part of non-recurring costs (setup fees, insurance, etc.)

It is also worth quoting Article 52 of the Consumer Credit Act in the application, which clearly states that the return of the bank’s commission and part of the interest should be made automatically by the bank after 14 days of early repayment:

The lender is obligated to settle the loan with the consumer within 14 days from the date of early repayment of the loan in full.

If we do not recover the bank’s commission (and other costs due to us) within 14 days of early repayment of the loan, we are entitled to interest for the default (in accordance with Article 481 of the Civil Code).

Who can apply for a refund of the bank’s commission?

• Repayment of the costs of the loan is due to all customers who took out the loan after January 1, 2012  (on this date the Consumer Credit Act came into force) and repaid it ahead of schedule.
• When the loan agreement is for an amount not exceeding 255,550 PLN , because only then can we talk about a consumer loan. The exception is an unsecured loan in the form of a mortgage, intended for the renewal of real estate.
• In the case of a mortgage loan  , reimbursement of costs is due only to customers who took out a loan after the entry into force of the new law on mortgage loan (22/07/2017).

In the case of early repayment of a housing loan, we can refer to Art. 39 of the Mortgage Loan Law issued on March 23, 2017, the first point of which is:

If the mortgage is paid in full before the date specified in the mortgage contract, the total cost of the mortgage is reduced by interest and other mortgage costs for the period during which the term of the contract was shortened, even if the consumer incurred them before payment.

Early repayment of the loan – what is the cost?

The question of fees for quick repayment of a loan, of course, depends not only on whether we are talking about a mortgage and a cash obligation, but also in the case of the first type of annuity.

Early mortgage repayment costs

• Early repayment before the expiry of the 3-year commitment period at a variable interest rate – the bank may charge for this procedure a fee of no more than 3% of the amount paid.
• However, if the consumer repays the mortgage loan at a variable rate of interest for more than 3 years, the bank will not be able to apply any additional fees to make the decision to pay off the obligations faster.

In the case of variable rate mortgage loans, the amount of the early full payment fee is as follows for individual banks:

Banks may charge the above fees only for the first three years of the commitment. After this time, early repayment of the loan is free. Commission terms for fixed rate mortgages may vary.

Early settlement fee for cash loan

• In the case of cash loans, the issue of calculating the early repayment fee is entirely at the discretion of the concerned bank and there are no legal impediments to its imposition. Therefore, it is worth familiarizing yourself with the rules for charging for such a procedure before informing the bank of your desire to pay faster – it may turn out to be unprofitable!

The justification for the presence of an additional fee for the accelerated loan repayment is simple – the bank wants to compensate itself for the loss caused by not obtaining the interest indicated earlier in the contract.

Why is the loan worth paying off faster?

The loan is one of the most burdensome obligations on the budget, and it is a burden not only from a physical point of view but also in a mental dimension. The awareness that expenses for the coming months, and even more so for years, must often include a large amount, which we will pay to the bank, can cause great discomfort and a feeling of pressure.

If, in turn, we are talking about a loan in a more general sense, then both the accelerated repayment of cash and mortgage obligations are associated with a significant improvement in creditworthiness. If at some point, after dealing with an existing obligation, for example, to buy a car under lease or to take out a new consumer loan for an unexpected need, then the chances of this are much greater.

In the event of an improvement in your financial condition, it is worth considering early loan repayment as an important step towards organizing your finances . In the case of a mortgage in particular, a quick repayment brings a huge benefit – we become the sole owners of our dream apartment faster, without fear that the specter of a “mortgage” hangs over it for a large part of our lives.

Advantages and disadvantages of accelerating loan repayment – summary

Turning to the summary of today’s text – let’s check the strengths and weaknesses of a quick loan repayment.

benefits.

• You can save a large amount of money.
• The bank is obligated to return the commission for the unused capital.
• Get rid of the costly burden on the budget faster.
• Improving creditworthiness.
• An opportunity to get another loan for less expensive expenses.
• physical comfort
• Acquisition of full ownership of the property that has been registered so far.
• The law in the current dimension is closer to the interests of the consumer who wants to pay off the loan faster.

cons.

• Related costs that the bank may charge for selected mortgage loans and any cash loan.
• A series of additional formalities.
• The necessity of bearing a large one-time cost.

sources:

http://isap.sejm.gov.pl/isap.nsf/DocDetails.xsp?id=WDU20170000819

http://isap.sejm.gov.pl/isap.nsf/DocDetails.xsp?id=WDU20111260715

https://www.lexlege.pl/ustawa-o-kredycie-konsumenckim/art-48/

Watch also

Prepaid Card – What is it?