How is the recalculation of the loan in case of early repayment

2024 Author: Howard Calhoun | [email protected]. Last modified: 2024-01-07 20:55

If there is a financial opportunity, the borrower seeks to repay the debt to the bank ahead of schedule. To do this, some lenders contribute amounts in excess of their planned payment. Thus, they reduce the amount of the principal debt or the term to fulfill the loan obligation.

How is the recalculation of the loan in case of early repayment? If the borrower repays the loan ahead of time, the bank makes some kind of "update", reducing the term or amount of the payment. This allows you to save on the total amount of overpaid interest, because if the lender repays the debt before the planned payment, it will not accrue loans on the loan.

Debt repayment: in full or in installments

So, debt on a loan, whether it be for a mortgage, consumer credit, etc., can be repaid either in full or in part. If the borrower decides to fully repay the entire debt, then the principal debt is paid, which is set for the current date.

If the loan is paid in part, the client at the time of making the payment paysamount in excess of the monthly payment. In this case, the debt is not completely closed, but the payment period or the amount of the monthly amount may be reduced. In this case, the procedure must be done at the bank itself, through operators or credit managers. Otherwise, the deposited funds will simply lie on the account until the next payment.

It is unprofitable for banking institutions if their customers repay the loan ahead of schedule - with such repayments, they lose their income from interest on each loan they repaid.

Recommendations for early loan payments

As a rule, for individual banks, this procedure is carried out on different conditions. However, for most of them, the general rules for early repayment are observed:

• The client must go to the bank where the loan was issued and leave an application for recalculation of the loan in case of early repayment. It indicates what the client intends to do on the loan (pay, renegotiate the terms) and what is the amount to be paid.

• Next, the bank considers the request. To find out if a positive decision has been made, you can call the hotline or contact your manager. Usually consent is by default, but sometimes it can take up to a week to process.
• Then the bank assigns a period during which the payment must be made. This is usually the date that is approved in the payment schedule. It is not necessary to pay on this particular day - funds in any casewill be deposited on demand. If the loan is paid in full, then a specific date is not indicated, since it is no longer necessary to make changes to the schedule or the amount of monthly payments.

What documents does the bank issue after recalculation

Recalculation for partial early repayment of the loan is provided the next day after the payment is made. The client approaches the bank, and the managers provide him with a document in the form of an updated payment schedule.

If the entire debt is paid, then the borrower also applies to the bank, and he is provided with a letter of inquiry that the loan agreement has been repaid and closed. As a rule, the notification is issued on the official letterhead of the organization with the signature of the head / head of the credit department. Such a letter is sometimes required to obtain any permits or references. For example, to obtain a credit history, if the CBI did not receive information about the repayment of the debt of an individual.

Possible options for debt recalculation

The above scheme is the most common and is used in almost all banks. However, other conditions may apply in some banks:

• Some banking institutions calculate a new payment schedule as soon as a partial payment of the debt has been made, and not after the planned date.
• New schedule provided in advance, before payment. Its entry into force still begins after the actual repayment.
• In some credit institutions, you can change the schedule yourself using online banks. The client pays the maximum amount that exceeds the monthly payment, and the system immediately generates an updated schedule. However, if the loan is repaid in full, after payment, you still need to go to the bank to confirm the closure in writing.

How to recalculate insurance for early repayment of a loan

As a rule, credit insurance is immediately included in the terms of the contract. Of course, whether to include insurance or not is everyone's business, the bank does not have the right to forcibly add this clause to the contract. However, insurance is still often used by borrowers. More often, this item is added to increase the likelihood of obtaining approval from the bank, and to a lesser extent - to really insure against risks for the entire lending period.

The amount of insurance can be insignificant if the loan is taken for a short period (six months, a year), and can become impressive if the contract is drawn up for a period of, for example, 10 years. Here the insurance premium will be tens of thousands.

So is the insurance recalculation done when repaying the loan ahead of schedule? It is not that simple. The insurance contract can be terminated at any time, however, a refund in the form of an insurance premium is not carried out, unless otherwise specified in the contract (in accordance with Article 958 of the Civil Code of the Russian Federation). Compensation Clausemust be registered, so first you should thoroughly study the terms of the insurance contract.

Sberbank: how to recalculate

Savings Bank, as one of the largest banks in Russia, provides customers with loan recalculation in case of early payments.

So, by recalculating a loan for early repayment at Sberbank, you can change the size of the principal balance of the debt, as well as reduce the interest rate on the loan, due to the reduction of the principal debt.

Before that, you need to make sure whether this procedure is provided for in the loan agreement, whether pen alties or commissions are charged for early repayment. After all, it is unprofitable for credit institutions to reduce interest, even if the client transfers a payment that exceeds the established schedule. However, it should be borne in mind that this issue is now regulated at the legislative level, and banks currently do not have the right to limit unscheduled payments.

In order to repay the loan in part or in full, you need to write an application. It indicates the amount, payment date and account number (or contract number).

Recalculation: deduction methods in Sberbank

If the debt is repaid in full, you need to clarify the balance with the loan manager, and exactly to the penny. If the principal debt is underpaid or overpaid by at least a ruble, the loan will not close. You need to make a transfer to the account on the current day and in accordance with the amount in the application.

After the payment is made, you canview the amount of recalculation of the loan loan in a special calculator. Specifically, there is no calculator on the Sberbank website, but other sources can be used. Of course, the online calculator data is calculated as an approximation.

The specificity of loan products at Sberbank is that they are provided mainly as annuity payments. So, even if the borrower makes an early repayment of the loan, interest is not recalculated, since their value is constant for the entire payment period. Only the period of "interaction" with the bank will be reduced.

At full repayment, everything is standard: you need to make sure that the contract is fully executed. To do this, the bank provides a certificate of debt closure and no claims against the borrower.

In case of early repayment at Sberbank, you can get part of the insurance premium. It is formed based on the period during which the insurance program will operate.

How the recalculation is carried out in VTB24

Unlike Sberbank, this institution offers the lender two ways to partially repay the debt - either by reducing the total term or by reducing payments.

The following features can be distinguished in VTB24 for recalculating a loan upon early repayment:

• The application must necessarily indicate a further condition on the loan (reduction of the amount; reduction of the term).
• A calculator is available on the VTB24 website, with the help of which customers themselves can calculate approximate data online.
• Application must be submitted at leastthe day before the scheduled payment.
• You can repay early on any day or according to the schedule.
• Recalculation does not apply to mortgages.

As for insurance, it is possible to terminate the contract unilaterally, but without a refund. So does it make sense to terminate it? However, in case of early repayment bilaterally, you can receive a part of the insurance premium, in proportion to the period until the end of the program contract. However, how to get a bilateral agreement is a difficult question.

Conclusion

So, recalculating a loan in case of early repayment is in any case beneficial for borrowers. It is in the interests of banks to receive stable interest rates from loans, so they can complicate this process, for example, by including in the contract certain sanctions or commissions for early payment. Nevertheless, it is possible and necessary to reduce the amount of monthly payments or the period of payments in order to stop paying the banks Nth amount of their income every month.