Loan repayment grace period – what does this mean?

Many wonder how to deal with problems with paying off the loan? The worst thing you can do is sit back and wait for the situation to resolve itself, for it will never happen. Then the temporary difficulty in repayment will only grow to the rank of a huge problem.

Grace is a concept commonly known in the credit environment. It allows the suspension of the capital part of the debt for a more distant date, thereby giving the borrower time to sort out his financial affairs.

What is a loan grace period?

What is a loan grace period?

It happens that when we reach for a bank loan, we fail to pay it back on time. In such a situation, banks reach out to their clients, offering them a grace period. The loan repayment grace period is delayed payment of the principal part of the installment. This means that the installment should be regularly repaid later, but it only covers interest or loan insurance.

The loan grace period mainly applies to mortgage loans, but not only. It can also be used for other types of loans, including cash, car, investment, student and even online installment loans+.

The grace period is granted by the bank at the borrower’s request. Some banks are able to offer a grace period of up to three years, provided that they receive a reliable argument from the client confirming that they need a grace period.

Mortgage payment grace period

Mortgage payment grace period

By taking out a mortgage, we can never predict what will happen for a dozen or so or several dozen years. Degradation at work, job loss or a serious illness preventing work and consuming a significant part of our savings – these are just some of the logs that life can throw us under our feet and thus hinder the timely repayment of the loan.

Loan repayment – how to do it without big costs? When losing financial liquidity, it is a good idea to suspend loan repayment. Unfortunately, the mortgage grace period extends the interest repayment period, which means that we will eventually have to pay more than at the beginning.

The borrower must, if possible, anticipate any problems with the loan repayment because the grace period at the beginning of the mortgage will make the value of interest much lower. If we decide to do it later, the interest will be much higher, and thus the amount we will have to pay back to the bank will be higher.

When is the loan grace period worth using?

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Postponing the repayment date is an important decision. It should be remembered that the postponement of debt repayment will make it much higher. Each subsequent installment increases the cost of the loan. Therefore, grace should be decided only in justified situations, when it will bring some benefits.

A grace period of the loan pays off when we get to the horse ca sp patches and interest portion of the loan to repay remains for us only part of the capital or when we crossed half the term of the loan and the amount of capital installment bed with hand wnała installment of interest.

The application for a grace period in loan repayment will also be justified in a situation when we decided to take a loan with decreasing installments, in which the capital will quickly equalize itself with interest that should be repaid.

How to get a loan repayment grace period?

To apply for a loan grace period, you must submit a special application to the bank for the possibility of granting it. This can be done at any time. An application for a grace period in loan repayment should contain not only the borrower’s basic data but also confirmation of his current financial situation, justifying the deferral of part of the debt repayment.

We must bear in mind that the bank will closely monitor our credit history and analyze credit risk. The debtors who are not in arrears with payments towards the bank can count on the positive consideration of the application.

Early repayment of cash loan – is it possible?

If you are paying back a cash loan, you must know that you can give back the money borrowed from the bank earlier, before the date specified in the loan agreement. The bank cannot block the early repayment of the cash loan. Check what you can gain from this solution and whether it is profitable.

Early repayment of cash loan in 2020 – what is it about?

Early repayment of cash loan in 2020 - what is it about?

When signing the loan agreement, the customer undertakes to return the amount of capital borrowed, along with interest charged by the bank and all other fees, within a strictly defined period.

The repayment of a cash loan is divided into principal and interest installments, which contain part of the capital, i.e. the repayment of a part of the relevant debt, and interest calculated at a specific interest rate, as a remuneration for the bank for granting the loan. The bank expects timely repayment of individual monthly installments.

However, it may turn out that the customer wants to pay the cash loan early and is fully entitled to do so. It is worth reading in the contract signed with the bank what conditions the bank will assume for earlier full or partial repayment of the loan. It may turn out that he will charge additional fees for this.

Thanks to this, it compensates for lost interest. Is it, therefore, worthwhile paying back the cash loan early?

According to the interpretation of the Act on consumer credit, the Financial Ombudsman and the President of the Office of Competition and Consumer Protection in the event of early repayment of a consumer loan, the creditor is obliged to reduce and refund all costs of such credit proportionally.

Do all banks allow early repayment of cash loans?

Currently, each bank offers its customers the option of early repayment of cash loans. This is almost standard.

However, the costs of such a decision may be slightly different, so when choosing a cash loan, you should familiarize yourself with the terms of early repayment. In some of them, this solution may be free, which will be extremely beneficial for the borrower.

Legal basis for early repayment of cash loans

The right to repay cash loans early is guaranteed by the Act of May 12, 2011, on consumer credit. In art. 3 indicates what should be understood as a “consumer loan agreement”.

Well, it is a loan agreement in the amount not exceeding USD 255 550 or the equivalent of this amount in a currency other than the Polish currency, which the creditor grants or promises to give it to the consumer in the scope of its activity.

Simply put, a cash loan can be defined as a consumer loan if:

  • is given to the consumer,
  • it is granted for purposes not related to the conducted business activity,
  • its amount does not exceed USD 255 550,
  • granted for a fee.

In art. 48 of the same Act, the legislator guaranteed the consumer that he has the right to repay the loan in whole or in part before the date specified in the contract, at any time. Early repayment of a cash loan cannot be made by the bank on whether the consumer will inform the lender in advance of such an intention.

Does early repayment of a cash loan pay off?

Does early repayment of a cash loan pay off?

In most cases, early repayment of a cash loan is beneficial for the borrower. The advantages of this solution are mainly due to the fact that it no longer has to worry about paying installments and can free itself from the financial commitment, which for many people is not only a financial but also a psychological burden.

However, the early repayment of the loan will not always be profitable. This can sometimes happen in the case of a mortgage, which is taken even for 25-30 years. Cash loans, however, do not entail such fears. Nevertheless, it is always worth checking what the loan agreement is for and whether it is talking about early repayment.

We can see by looking at the numbers that early repayment of a cash loan pays off. Imagine that you take a cash loan for the amount of 20 thousand. USD for a period of 12 months. The loan interest rate is 7% per annum and the installment is fixed.

This means that you have to pay installments of USD 1,732, which means that the amount of interest is about USD 768. Therefore, your total cost of credit will be USD 20,384.

However, if you pay off your loan earlier, e.g. after 4 months, your interest amounts to approximately USD 320. What does this mean for you? Savings of approx. USD 350. The above calculations assume that the bank does not charge a commission for the early repayment of cash loans.

Banks provides 2000 USD loan.

If you want to take out a loan of 2000 USD, you can make a comparison with a number of offers when looking for a small loan. Even if it is only 2,000 USD, you can save on credit costs if you choose the cheapest provider in this segment. In principle, it is of course the case that the providers differ in terms of their conditions depending on the loan amount and the chosen term. If a bank appears in first place with a loan of 5000 USD, this does not mean that this bank is automatically the best provider with a 2000 USD loan.

We have made a pre-selection for you. If you apply for a loan of $ 2,000 and choose a very short term of 12 months, Spin Lender, Across Lender and Capital Lender are at the forefront. Which of the providers you choose should be made dependent on which bank has the best representative example, because this is ultimately decisive for the conditions on which a 2000 USD loan is granted.

An overview of the three best-placed providers

An overview of the three best-placed providers

An acceptance rate of 80 percent is shown at Spin Lender. That means eight out of ten loan applicants get their loan approved, only two get nothing. The representative example of the Santander can be seen, because only 2030 USD have to be repaid for a loan of 2000 USD.

It looks similarly good with the Across Lender. Here, too, the monthly rate is less than 170 USD and the representative example shows that with a term of only 12 months there are hardly any loan costs. The acceptance rate at Across Lender is at least 75 percent.

Capital Lender also came third in our loan comparison. With an acceptance rate of only 60 percent, however, it seems as if consumers have significantly better chances at the former banks that their loan application will be approved. The rate at easy Credit differs only slightly from that at Spin Lender or Across Lender.

What should be considered when comparing our loans

What should be considered when comparing our loans

If you apply for a loan of USD 2,000 with such a short term, the borrower has the advantage of low credit costs and the fastest possible debt relief. On the other hand, there is the disadvantage that the monthly charge is relatively high. If almost 170 USD is too high, the loan calculator can be used to set a longer term. The providers can also change with the term.