Pursuant to the Consumer Credit Act, an installment loan is a form of consumer credit. Therefore, the provisions of this Act regarding the principles and the procedure for concluding contracts, as well as consumer rights are applied to it. One of the aforementioned rights of the borrower, which is indicated in the Act, is the option to pay back the loan early. What are the benefits of faster repayment?
How to exercise the right to early repayment of the installment loan?
Each consumer has the right to comply with the provisions of the Consumer Credit Act and repay the loan in advance. He may undertake partial repayment, or settle all liabilities incurred in full, freeing himself from the obligation incumbent on him. To do this, you must contact Customer Service and discuss the most important details of your privileges.
The right to repay the loan ahead of schedule should be written down in the contract. In addition to the amount of the liability, the cost of the loan, the repayment date, this is a very important issue for the borrower. The more so that not every person is familiar with the applicable regulations and did not know the law, which in many life situations are extremely helpful. If the contract does not have such a provision, it is highly probable that the selected non-bank institution is not a credible lender and does not function in accordance with the letter of the law.
The lender’s obligations with the borrower paying off the loan faster
What are the obligations of the lender when the borrower decides to pay off the loan faster? Pursuant to applicable regulations, the lender is obliged to settle the loan with the consumer within 14 days starting from its early repayment in full. So, in situations where the entire amount is reimbursed, the lending institution will have to reimburse us some of the costs we will incur. How is this done?
The lender who is obliged to return the overpayment may:
- ask for the refund of the entire amount, and when it receives the money, it will make calculations and return to our personal account the part that relates to the period in which we did not use the loan,
- make earlier calculations and reduce the amount we will be required to pay in connection with early repayment of the loan.
Interest refund in case of early repayment of the loan
Interest on the loan is one of the costs that we should reimburse in the event of early repayment of the loan. In accordance with applicable regulations, reimbursement, in principle, includes all costs of the loan, i.e. a proportional part of administrative fees, commissions or interest. If you have decided to take out loan insurance, keep in mind that it is not refundable.
What can we do if the lender fails to pay the overpayment? You should definitely contact the institution that gave us the loan with a quick complaint. In a situation where the lender rejects the complaint, we have the right to submit a request to intervene to the Financial Ombudsman.