Special repayment loan
There are always situations in life in which you need a loan, but then you can unexpectedly pay it off faster than expected. For example, if you make an inheritance, you can usually repay current loans immediately. This is possible in any case, because by law every loan taken out in Europe is a loan with a special repayment.
A loan with a special repayment: that’s the concept
A loan is actually a business: you are contractually obliged to repay a loan with the installments in the negotiated amount over a certain period. The basic principle is that it is not possible to repay a loan faster because this would violate the negotiated terms and conditions. However, legislators have always allowed a deviation from this because it is advantageous for ordinary people if they can get rid of the monthly installments more quickly and at first glance is not a disadvantage for the bank, because you get it Money back even with an early repayment. The loan with a special repayment is simply a loan that stipulates that all or part of the loan can be repaid early.
The interest problem
For a long time, however, there was a problem with interest on loans with a special repayment, because at second glance there is a disadvantage for the banks: These incur new costs if part or all of the loan is repaid ahead of time, because the contracts have to be changed. The accounting must also be adjusted. Almost all banks therefore increased the interest by a prepayment penalty or a compensation for the special repayment. The size of the increase was so large that it was associated with considerable financial disadvantages for borrowers to actually opt for the special repayment. The banks made a huge additional profit in this way.
The new regulation
Since 2010, however, a new law has been in place for loans with special repayments, which has put an end to this because the interest rate increases that a bank may impose as a result are now capped. Banks may charge a maximum of one percent interest on loans that run for more than a year. For loans that have a remaining term of less than twelve months, they may add a maximum of 0.5 percent of the loan amount. This law has general validity. This means that it is not possible for all banks that offer their loans within the state and have a banking license to deviate from it. But money houses that have a different banking license. Anyone taking out a corresponding loan should therefore make sure where the bank is located and what its regulations may be.