Early repayment of a consumer loan: Deadlines, advantages and penalties.
When you sign a credit contract, you agree to repay it until its term, this is valid both for consumer loans and for mortgage loans. However, there is always a mention providing for early repayment in the general conditions.
Credit companies and banks cannot do anything, because in France credit is strictly framed by the consumer code.
The case of consumer credit:
EXPLANATION: In the majority of cases you can repay your consumer loan without having to suffer penalties. Unless it was contracted after 01/05/2011 and the amount to be reimbursed is more than 10,000 USD.
In other words :
- If the signature is before this date: No penalty
- In all cases, if the amount owed is less than 10,000 USD: No compensation to be paid either.
Be careful, don’t be fooled! It is not enough that the contract was signed before 2011 for you to be compensated. No, it must also be expressly mentioned in the general conditions of the credit. Be vigilant, check.
If you enter the scenario or may be penalized, be aware that the penalty cannot exceed:
- 1% of the loan amount if the remaining term to cover was more than twelve months.
- 0.5% if this duration is less than twelve months.
- This compensation may in no case be greater than the amount of interest which remained due.
INSTRUCTIONS FOR USE: Indicate to the organization that granted the loan that you will terminate it in advance. Make it by registered mail with acknowledgment of receipt. Ask for a precise statement of the amount remaining to be paid and specify the date on which you want the account to be terminated. (Preferably on the monthly due date). The deadline (between sending the letter and the date of the statement) is one month.
Why refund a credit before its term?
The only motivation and the gain, why otherwise? This operation is only successful if the loan rate is higher than the rate of return on the investment that you could have made. Example: It is interesting if the credit rate is 6% and you have an investment at 1.5%. If the transaction results in the payment of compensation to the bank, be sure to include it in your calculations.