Many people prefer to use borrowed money to make large purchases. To do this, they issue various loans offered by numerous banking institutions. With borrowed funds, you can buy real estate, a car or household appliances. The bank issues a special payment schedule to the borrower, according to which the necessary amounts of funds are paid monthly. If a person wants to cope with the loan in advance, then he can make additional payments. Borrowers should know what early repayment of a loan means, how this procedure is performed, as well as how interest is recalculated and insurance is returned. If people really have free cash, then they can reduce the overpayment on the loan.
What does early loan repayment mean?
It is represented by a process in which people deposit funds outside of the payments defined by the bank in the payment schedule. The procedure can be partial or complete, and in the second case prematurelytermination of relations with a banking institution. This process allows you to save a fairly significant amount of money, as the amount of interest on the loan is reduced.
Borrowers often have different questions regarding the early repayment of a consumer loan, car loan or mortgage. They don't know how the interest is recalculated or whether the insurance can be refunded.
Types of early repayment
Often, early repayment of a loan acts as an effective way to restructure a loan. To do this, a new loan is issued on more favorable terms. The funds received are used to pay off old loans. Under such conditions, it is possible to combine several loans, and the credit burden is also reduced.
What does early loan repayment mean? It is represented by early termination of the agreement between the bank and the borrower. The procedure can be performed in two ways:
- partial repayment, in which only a small amount of funds is deposited, therefore the principal debt is reduced, but the citizen still remains a borrower of a banking institution;
- full repayment consists in paying the full amount of the principal debt, therefore, the loan agreement is terminated ahead of schedule.
In 2011, Federal Law No. 284 was amended, on the basis of which banks now do not have the right to fine their borrowers if they decide to repay the loan early. Additionally, banksmay charge any interest on early amounts received.
But on the basis of this regulation, borrowers have a certain obligation. They must notify bank employees in advance of the decision made, for which a written application is submitted 30 days before depositing the required amount of funds.
Full loan repayment
Early repayment of a loan at Sberbank can be performed at any time, but you will have to warn the specialists of this banking institution in advance about the planned event. If a person has a large amount of funds, then he can fully repay the loan ahead of schedule.
To fully repay the loan, you need to have an amount equal to the size of the principal debt. Bank employees are notified in advance of such a decision. At the end, you can get a certificate from the bank employees about closing the loan. If the loan was issued for the purchase of housing, then the encumbrance in the form of collateral is additionally removed.
This option involves depositing a small amount of funds that is not enough to fully repay the loan. After that, people continue to transfer money to the bank in the form of monthly payments. But by making an additional amount, the payment per month is reduced or the loan term is reduced.
After the early repayment of the loan, Sberbank rebuilds the payment schedule, as well as recalculates interest. Therefore, the borrowers themselves must contact the banking institution to obtain new documentation.
According to art. 810 of the Civil Code, each borrower has the right to early repayment of the issued loan. It does not matter the type of the loan. Restrictions may be provided only by an agreement drawn up between the borrower and the bank, but they must not contradict the requirements of the law. In Art. 810 of the Civil Code refers to the need for advance warning of bank employees about the decision.
According to Federal Law No. 353, banks have the right to independently decide when exactly borrowers will be able to deposit additional amounts. The procedure can be performed at any time or when debited as a monthly payment.
People should not only know what early repayment of a loan means, but also how it is correctly calculated. In this case, they will be able to control the employees of a banking institution. In practice, there are often situations when bank employees accidentally or intentionally make mistakes, so the principal debt is not reduced.
For self-calculation, you can use special online calculators that are freely available on the Internet. They only need to enter information about the amount of the loan and the principal debt, as well as the amount that is paid ahead of schedule. As a result, the required amount of the monthly payment will be obtained, which should be less than the current payment.
Terms of early repayment of the loan may vary slightly in different banking institutions,Therefore, you should first study the provisions of the loan agreement. Some banks change the loan term, while others prefer to reduce monthly payments. Funds can be deposited at any time or only on the payment date.
Pre-borrower must notify the bank that he intends to carry out early repayment of the loan. Does the term or amount change? Detailed information can be found in the loan agreement. Standard process rules include:
- each borrower can repay the loan in part or in full;
- banks are required to restructure payment schedules;
- many institutions require more than the monthly loan payment for early repayment;
- calculation of the amount of debt should be carried out not only by bank employees, but also by direct borrowers, so that they can verify the correctness of the calculations;
- if a citizen decides to deposit an early amount, then he must initially draw up a written notice sent to the bank 30 days before the due date;
- it is not allowed for the bank to charge the borrower any interest or pen alties for these actions, since in this case a citizen can file a complaint with the Central Bank or Rospotrebnadzor;
- you can start repaying the loan ahead of schedule literally one month after receiving it;
- if the loan is fully repaid, then it is imperative to take a certificate from the bank stating that there is no debt, since if the borrower remains in debt even a small amount of funds, this may cause litigation andworsening credit history.
When making early payments, it is important to carefully study the provisions of the loan agreement. Often in this document, banks deliberately indicate information that violates the requirements of the law. Under such conditions, citizens may not take into account this information, so they can focus solely on legal requirements.
Is it profitable to repay the loan ahead of schedule?
Many people think about whether to repay the loan ahead of schedule. This procedure does not always bring any profit. Process features include:
- if it is difficult for a borrower to cope with large monthly payments, then when making a large early payment, he can count on a significant reduction in the amount paid;
- under such conditions, the credit burden is reduced by reducing the interest transferred to the bank;
- recalculation concerns only future payments, therefore, funds paid for past periods are never returned to borrowers;
- the bank in any case makes a profit from lending, so the initially received funds are used to pay off pen alties, pen alties and overdue debts, and only then the principal debt is reduced.
Reviews about early repayment of the loan are mostly positive, so people with free cash often use this opportunity to reduce the credit burden. Some people argue that if a mortgage is being issued, early repayment is notbeneficial. Since funds are issued for the purchase of real estate for a really long period of time, during this period, due to inflation, it becomes easier and easier to pay funds on a loan. Therefore, it is advisable to repay only short-term consumer loans ahead of schedule.
How is the procedure done?
Initially, the borrower should learn about what is needed for early repayment of the loan. The procedure is considered quite simple, so the following steps are taken to implement it:
- a sum of money is being prepared, the amount of which exceeds the monthly payment on the loan;
- next you need to find out about the bank employee about exactly when you can deposit these funds;
- you can get an application form from a specialist of the institution, which indicates the need for early repayment of the loan;
- by the specified date, the account from which the funds are withdrawn to repay the loan must have the required amount to be debited;
- You can deposit money into your account through the bank's cash desk, ATMs or money transfers.
On the appointed day, the declared amount will be withdrawn from the account, which will be used to pay off the principal debt.
Is there any compensation?
Recalculation of interest on early repayment of the loan applies only to future payments, so no compensation is assigned to borrowers. Until 2011, banks sometimes charged customers with fines or interest, but now the credit burden is only reduced.
But ifto apply for a loan, people took out insurance, then they are en titled to receive some of its part if credit relations with the bank are terminated ahead of schedule.
Can I get my insurance back?
If the loan is repaid in full ahead of schedule, then the borrower has a question about how to get insurance in case of early repayment of the loan. The fact is that the insurance policy is usually purchased for the entire term of the loan. Since credit relations end in advance, a person has the right to request a recalculation and return of a certain amount of funds from the insurance company.
To receive such compensation, you need to contact the organization where you bought the insurance policy. An application is drawn up, to which a certificate from the bank is attached, confirming the premature repayment of the loan. A recalculation is made, as a result of which the applicant receives the due amount of funds. It can be issued in cash or by transfer to the applicant's bank account.
Consequences of the process
If a person regularly abuses the early repayment of various loans that are issued in various banks, then this can even lead to negative consequences. Under the law, there are no pen alties for this, but the banks themselves have a negative attitude towards such borrowers, as they do not receive a significant part of the profit from them.
Therefore, such borrowers are included in a special list, as a result of which, when applying to different banks with an application, they receive a refusal to receive borrowed funds.In addition, the scoring score is deteriorating, which is determined by bank employees before issuing a loan to a potential borrower.
Therefore, although the early repayment of loans is considered a beneficial process for every person, but this process should not be abused. Sometimes such actions do not bring any profit at all, for example, if a mortgage is issued for a long period of time.
Anyone can legally repay loans early. The procedure may involve full or partial repayment of the loan. To do this, it is important to notify bank employees about the decision made 30 days before depositing the prepared amount.
When the loan is repaid in full, citizens can expect to receive a certain amount of funds from the insurance company where the personal insurance policy was bought at the time of the loan. If a person abuses early repayment, then this can cause banks to constantly refuse to issue loans.