What do I need to know about credit so I don’t have to pay too much?
Lending is a convenient way to get a large sum of money quickly, and when used wisely, it can even be profitable for a person. But borrowers are not always familiar with credit laws, and this opens the door to not-quite-legal actions that can lead to unnecessary overpayments. Let’s talk about the details that are worth knowing so as not to overpay.
Penalty for refusing a loan – it is illegal
A person signed a loan agreement with the bank, but then suddenly changed his mind. Maybe he found some spare money, or maybe he just decided that he didn’t need the big purchase that much. But the bank refuses to terminate the contract and demands a fine. Have you ever heard of such situations? If so, you should know that such behavior by the bank is against the law. Under the law, the borrower has the right to refuse to receive credit in whole or in part by notifying the lender before the expiry of the period set by the contract.
Within fourteen calendar days from the date of receipt of a consumer loan you can prematurely return the entire amount of the consumer loan without prior notice to the lender, paying interest on the actual term of the loan. If, however, two weeks have already passed, you will have to worry about early repayment on the conditions of the banking organization.
There should be no commission for opening an account
The borrower opens a credit account: get a card or take a loan. The bank informs him that there is an additional fee for opening an account, and the person has to pay extra. This is also illegal. Such a scheme can be used by “black” lenders, who pretend to be a bona fide organization. According to the law, the bank is obliged to undertake actions related to the issuance of credit funds to the borrower, including opening an account and transferring money to it. Forcing a person to pay for this he has no right.
- However, a credit organization has the right to offer a borrower additional services, such as SMS-informing – for these services you really have to pay. But you do not have to pay for these services, and your fees for them are usually very low, so they are not too costly.
- You may also be required to pay a fee if you use the credit account to purchase currency or transfer funds to other banks for non-lending operations.
The terms of the contract do not change after you sign it
We advise borrowers to read the loan agreement carefully before signing it. One of the reasons you need such care is that the terms of the agreement cannot change after you sign it. There is one exception: if some provisions of the agreement contradict the law, they can be disputed in court. Otherwise, the document should provide exhaustive information about the use of credit, and if some information is not clear to the borrower, the bank is obliged to explain them. A note that the bank has the right to make changes to the contract unilaterally is illegal. The document should describe all the conditions, including the possible change of the interest rate and the amount of penalties for non-compliance with the agreements. By the way, if the interest rate is variable, the bank is also obliged to explain under what conditions and to what extent the rate can increase.
Insurance is not obligatory
Let us say right away: we think that credit insurance is a good practice, which can protect, including the borrower, if used properly. However, if the bank says that you can’t take the credit without insurance, it is not right. Credit should be available regardless of the presence or absence of additional services. You can choose your own insurer from the companies that cooperate with a particular bank, or refuse to insure at all. The bank has no right to refuse to provide insurance only because you have refused it. However, there is one detail: the absence of insurance increases the risks, so the terms on a loan without it may not change in your favor. So it’s a good idea to calculate in advance whether it will be better to have insurance or not. If you decide to take out insurance, carefully read the terms of the insurer and check whether the information is correct, for example, about chronic diseases.
You can always repay the loan prematurely.
Such an opportunity is available to the borrower by law, and the bank has no right to prevent early repayment. If a person decides to repay the loan early, he can do so. Interest in this case will accrue until the borrower pays the whole amount, and since the loan is repaid early, the amount of overpayment will be less than when repaying on time. The only nuance: the borrower has to inform the bank about his decision to close the credit ahead of schedule and tell it when he can repay the whole amount. The bank in response will recalculate the interest and provide new payment dates. How soon to notify the lender depends on the policy of the particular organization. Some banks allow you to begin early repayment on the day of the application, while others allow you to wait up to 30 days. By the way, such repayment does not worsen the credit history.
The borrower, who knows his rights, can use the credit with greater benefit to himself and avoid unnecessary overpayments. But do not forget about your obligations: pay your debts on time, avoid arrears and debts, and inform the bank in advance if you have problems. This way you can protect yourself from possible penalties and unpleasant consequences.