What is a loan agreement and how to terminate it ahead of schedule

When applying to the bank for consumer credit, the borrower assumes certain obligations, and the main document fixing the rights and responsibilities of the parties to the transaction becomes a loan agreement.

The loan agreement indicates all the essential conditions for borrowing: loan size, loan term, interest, amount of commissions and additional fees. There are important points of this document that you need to pay attention to first.

How much is a loan?

The full cost of the loan, in accordance with the requirements of current legislation, should be indicated in the contract. It consists of the following components:

Amounts of principal
Amounts of accrued interest;
Amounts of commissions for issuing, servicing and accepting payments to repay a loan.

The lender is obliged to indicate the total overpayment of the loan and include as an annex to the contract a repayment schedule, which presents the amount of mandatory payments and the dates of their payment. The borrower can independently calculate a loan.

Specify in the loan agreement the date from which the calculation of interest on the loan begins. It is desirable that it corresponds to the date of transfer of the borrowed funds to the client's account, and not to the date of transfer by the bank. You can try to agree with the bank on changing the date of making mandatory payments so that they correspond to the day of receipt of wages, and do not lead to problems and delays every month.

If a mortgage loan is requested, you should familiarize yourself with the bank’s rates for settlement and cash services in advance and specify what expenses for obtaining a loan will have to be paid separately.

In bank rates you can find many interesting fees and charges. Sometimes a borrower has to pay about 10% of the amount at a time to provide a loan, and he is obliged to pay interest for the entire loan. Maintenance and opening of a loan account is the direct responsibility of the creditor bank, but this account is necessary for internal procedures, and not for the borrower. The Central Bank has forbidden to collect fees from customers for the maintenance and creation of such accounts, but often banks continue to levy monthly.

Is it possible to repay a loan ahead of schedule?

Thoughts on early repayment do not always appear at the time of the loan, but it is better to think it over in advance. A moratorium on repaying a loan earlier than the specified deadline can subsequently cause a lot of trouble. After all, you will not be able to quickly pay off the current loan, draw up other obligations, and become the full owner of the property purchased on credit. If you decide to terminate the contract ahead of schedule, you will have to pay the bank a fine or an additional commission, which can reach several percent of the loan amount.

First make sure that the bank is not against early repayment of the debt and that money can be returned quickly in order to save on overpayments.

How much do you have to pay for late payment?

Another interesting section of the loan agreement is devoted to penalties for violation of borrowing conditions. For non-compliance with the amounts and terms of making mandatory payments specified in the repayment schedule, the bank sets daily additional commissions that increase the amount of interest calculated during the delay period. An increased percentage and a fine may be charged on the basis of calculating the total loan amount either on the balance of the debt or on the amount of the late payment. If you take a cash loan, be sure to specify this information.

At the slightest violation of the schedule, information about this falls into the credit dossier, so make payments on time and a little earlier than the established date. The amount of payments should include fees for receiving or transferring funds. If the delay is more than 10 days, the bank may begin the process of collecting the remaining debt and file a lawsuit with the court. Clarify the procedure for these decisive actions to prevent unpleasant surprises.

The obligations of the borrower under the terms of the loan agreement may include the requirement to inform the bank about changes in the data of the borrower: change in marital status, change of name, actual residence or address of registration, place of work, contact information, income level and other information.