How can I terminate my credit contract early and what costs could be involved?
December 10, 2023 | 40,00 EUR | answered by Alwin Reuter
Dear lawyer specializing in banking law,
My name is Katrin Siebert and I have a question regarding the early termination of my loan agreement. In 2018, I took out a loan with my bank to finance a car. However, my financial situation has since improved and I would like to terminate the loan agreement early.
Currently, I am making regular monthly payments to the bank and still have a remaining debt of approximately 10,000 euros. I have already spoken to my bank advisor, but he has not provided me with specific information on how to terminate the loan agreement early and what costs may be incurred.
My concerns are that I may have to pay high prepayment penalties and I am unsure of the steps to take. I would like to exit the loan agreement as soon as possible to achieve financial freedom and avoid additional costs.
Therefore, my question to you is: How can I terminate my loan agreement early and what costs may be involved? Are there specific deadlines or requirements that I need to consider? What steps should I take next to successfully terminate the loan agreement?
Thank you in advance for your help and support.
Sincerely,
Katrin Siebert
Dear Mrs. Siebert,
Thank you for your inquiry regarding the early termination of your loan agreement. I understand that you have improved financially and therefore wish to terminate the loan early to rid yourself of the remaining debt. Below, I will explain in detail how you can proceed and what costs may be involved.
First of all, it is important to know that you generally have the right to terminate your loan agreement early. This is stated in § 489 of the German Civil Code, which allows you to terminate a loan agreement with a statutory notice period of three months. So, if you were to terminate your loan agreement now, you would be released from the contract after the expiration of this three-month period.
However, in this case, the bank may demand a prepayment penalty to compensate for the lost interest income due to the early termination. The amount of this compensation depends on various factors, such as the remaining term of the loan, the current interest rate, and the amount of the remaining debt. Therefore, it is important for you to request a precise calculation of the prepayment penalty from your bank to understand what costs you would incur.
To successfully terminate the loan agreement, you should first notify your bank in writing that you wish to terminate the contract early. Also, request a detailed breakdown of the prepayment penalty. Carefully review this calculation and seek legal advice if necessary to determine whether the demanded compensation is reasonable.
If you are unsure about the next steps to take, I recommend consulting a specialized attorney in banking law. An attorney can provide comprehensive advice, review your rights, and assist you in communicating with the bank.
I hope that this information has been helpful to you. If you have any further questions or need legal assistance, please feel free to contact me.
Sincerely,
Alwin Reuter
