Early repayment is a privilege of every borrower. The customer has the right to repay the loan at any time during the term of the contract. Legal regulations guarantee this possibility. One of them concerns the possibility of early repayment of the contracted obligation.
Non-bank loans are subject to the same legal act as bank loans. I am talking about the Consumer Credit Act. It contains a provision regarding the repayment of part or all of the liability before the deadline specified in the contract.
The Consumer Credit Act regulates the time the loan is settled by the service provider. The loan company is required to settle the loan with the customer within 14 days from the date of early repayment. In addition, if the loan is repaid ahead of schedule, the lender is obliged to return the overpayment to the client.
How is the loan repaid early?
Most non-bank companies give their clients the option of early repayment, but not all. Therefore, make sure that the non-banking institution you have chosen really provides for this option. Information on this subject can be found in the loan agreement.
Anyone who wants to pay back a loan ahead of time should report their intention to the lender. He will provide information on whether the loan can be repaid early and, if so, on what terms. Early repayment of the loan affects the total cost of the loan.
For details of the financial aspects of this process, please contact the Customer Service Department of your loan company. We will be released from some fees, but others will not be avoided. It is therefore worth finding out when paying back the loan before the deadline actually makes sense.
As for the repayment of the loan ahead of schedule, it is done in exactly the same way as the repayment of subsequent loan installments. The money should be transferred to the bank account indicated by the lender. The transfer may also exit from the account of a third party, but you must remember to enter the loan number in the title of the transfer.
This number is individual for each borrower, which is why by placing it in the title, we can be sure that the money will be sent to the right place.
In what situations do not pay back the loan before the deadline?
Although early repayment of the loan should not involve any additional fees, it may happen that the lender will request an additional commission. Such a situation may take place in cases specified in the Act, to a small extent.
In accordance with art. 50 of the Consumer Credit Act regulating this matter, the service provider may require the customer to pay a loan before the deadline if:
- repayment falls on a period when the interest rate is constant,
- the amount of the loan repaid over a period of twelve consecutive months is higher than three times the average salary in the enterprise sector, announced by the President of the Central Statistical Office in the Official Journal of the Republic of Poland “Monitor Polski” from December of the year preceding the year of loan repayment.
If you decide to pay off the loan anyway, check that the commission does not exceed the legal limits. Commission for loan repayment before the deadline cannot exceed :
- 1% of the repaid part of the loan, if the period between the actual repayment of the loan and the deadline specified in the contract exceeds one year,
- 0.5% of the repaid part of the loan, if the period between the actual repayment of the loan and the deadline specified in the contract does not exceed one year.
Early loan repayment and interest
Before making a decision to pay back the loan early, it is worth looking into the loan agreement and checking the relationship between early loan repayment and interest. It is also good to carefully analyze any additional costs resulting from early repayment.
It may happen that we do not recover some of the interest. Usually, preparation fees and notary fees related to the preparation of the contract are not refundable. The type of interest that we have chosen is the most important in the case of early loan repayment: equal or decreasing interest.
In the case of equal installments, part of the capital installment increases and interest decreases over time, so the later we repay the loan, the less benefits we will get.
What are the formalities related to early loan repayment?
A borrower wishing to pay off debt ahead of time must reckon with the fact that it will be necessary to complete all formalities connected with it. Non-bank institutions may introduce formal rules for the use of this option, but they do not have to do it.
The formalities referred to above are usually the necessity of submitting an application with information on the intention to repay the liability earlier, no later than 3 days before making the transfer. It is worth finding out in advance what your loan company is like to avoid any understatement in this matter.