If suddenly the termination of a current loan flutters into the house, there is great concern. Rarely, however, the termination of the loan agreement takes place for no reason. In this guide, we shed light on possible reasons for termination and then present useful solutions.
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Possible reasons for credit termination
For most bank customers, the situation is tantamount to a medium-sized disaster: the bank has canceled the loan. It usually grants the borrower a reasonable period of time to use to repay the outstanding amount. But what are the reasons for a loan termination?
A loan termination does not happen overnight. If the bank terminates the loan agreement, there has usually been a long period of uncertainty in which the borrower failed to repay his loan installments on time. This increases the uncertainty for the bank as to whether its customer can still meet its payment obligations in the long term. If a bank has canceled a loan, it never does so for no reason, as there is a legally binding contract with its customer. Therefore, the borrower must always have breached contractual obligations when a loan is canceled. The main reasons are late payment or customer misconduct.
Legal requirements for a loan termination
The most common reason for a loan termination is late payment. The borrower is then in arrears with at least two loan installments in a row, alternatively there may be a backlog of a certain percentage of the loan amount. This is usually 2.5 percent of the loan amount for real estate financing, for installment loans it depends on the length of the term and is between five and ten percent. Then a bank sets a two-week deadline for the additional payment and indicates the result of the credit termination if the payment is not made.
Wrong information given?
Misconduct on the part of the customer can also result in the loan being canceled. If there is an important reason, the termination can be given without notice. This includes incorrect information on the asset situation in the loan application, a significant deterioration in the financial situation or a loss in value of the security provided. The remaining debt is then to be paid immediately, and there is usually an entry in the Credit bureau.
Special case overdraft facility
Finally, the bank can also have a contractual right of termination, which is often tied to compliance with a deadline. As a rule, these are loans with no fixed terms, such as the overdraft facility or master credit. The bank then sets a reasonable period within which the customer can repay the loan or reschedule it. This period is usually six weeks, and no entry is made in the Credit bureau.
What are the next steps if my loan is canceled?
Keep calm, inform, sleep on it for one night
As much as a surprising loan termination can lead to economic difficulties, it is important to remain calm. This also includes refraining from unreliable loan offers. Loans without Credit bureau, loans “in difficult cases” or loans upon loan termination, which are intended to appeal to borrowers with poor creditworthiness, are very popular. Such loans are reputable only in rare cases, usually they will bring the borrower into further financial difficulties. It is better to first analyze the economic situation in detail when the loan has been canceled.
Find the conversation with your bank and renegotiate
In any case, it must then be checked which valid solution options exist. The first step is to clarify the amount that can be repaid. Can the family provide financial support? Can Life Insurance Be Lent? What reserves can be used? Is it possible to take up a second job in the short term, through which the loan can be repaid in higher monthly installments? The goal should therefore be to make a significant repayment within a short time. Subsequently, further installment payments may be agreed.
The key words to be mentioned here are change of debtor or change of creditor. Taking out a loan from another bank can be sensible if you can do so on better terms. Examples include an improved interest rate and a lower monthly rate. As always, weigh it up personally.
Ultima ratio: register personal bankruptcy
A comparison can also be sought. Every bank has the risk that it will not receive anything from the outstanding loan amount if it has canceled the loan and the borrower has filed for bankruptcy. Therefore, a waiver by the bank of part of the loan amount can also be a solution. In the worst case – if the canceled loan is very high – the path to personal bankruptcy remains, which is no longer a rarity today and can be a valid option in justified cases.