One speaks of the remaining debt, when it comes to the end or the termination of a loan. The remaining debt refers to the remaining amount still to be paid to the bank before the contractual relationship has ended.
Depending on the bank, the remaining debt can also be paid in installments or in the form of new financing (follow-up financing ). In the case of early termination of a loan, however, the residual debt is given a special status. It is included in the prepayment penalty calculation and is used to calculate a parameter on the residual debt using a prepayment penalty calculator.
In a nutshell: information on the remaining debt for fast readers
- The early repayment penalty may not be higher than 1% of the remaining debt if the loan agreement is terminated.
- If the full repayment of the remaining debt will not take more than one year, the early repayment penalty on termination of the loan agreement may not exceed 0.5% of the remaining debt.
- A repayment loan allows for a quicker repayment of the remaining debt, as an annual repayment of 10% of the debt is agreed. The repayment loan is associated with relatively high interest rates. An annuity loan, on the other hand, allows repayment of the loan in constant installments.
- A residual debt insurance is available for the remaining debt if the lender has died, or because of unemployment or incapacity for work can no longer pay the due installments.
What role does the residual debt play in the prepayment penalty?
In Germany there are some legal regulations for the uniform calculation of the prepayment date does not exist. For example, the early repayment penalty on termination of the loan before the end of the actual term may not exceed 1 percent of the remaining debt. This fact is ignored by most lenders! Otherwise you can not explain the numerous excessive prepayment penalties. If, according to the actual repayment plan, no more than one year is required for the full repayment of the loan, the prepayment penalty may not exceed 0.5 percent of the remaining debt. You can rely on that at any time. Although this relationship is established by law, not all banks are immediately cooperative with regard to clearing repayment or redemption of the claim. When it comes to repayment claims or the legitimate refusal of a claim for payment, a letter from the lawyer is still more meaningful than a letter from the bank client itself. Would you like to speed up the process of clarifying your credit and are you involved in the case of payment already made? Request for repayment, the commission of the lawyer is the best way.
Prepayment penalty for residual debt
The way lenders and borrowers handle the issue of residual debt is reflected in the lender’s goodwill. If the borrower of the installment loan offers a debtor change or a sale of the property encumbered with the loan, it is up to the credit bank to give an adequate answer. This is reflected in a good lender-borrower relationship on the one hand that the lender agrees to the request of the borrower. On the other hand, the positive relationship may show up in the absence of prepayment.
As a general rule, a prepayment right on a loan should be waived if the lender has not incurred any financial loss with the early termination of the loan. Unfortunately, the actual financial loss is not clearly determined by the calculation of the prepayment date. Both the active-asset model and the asset- liability model provide a modeled representation of the loss. Ultimately, it remains in the lender’s hand to withdraw or partially or fully enforce the claim for damages in the form of the overdue facility do. In calculating the prepayment date, the amount of the remaining debt is one of the basics.
What is the difference between an annuity loan and a repayment loan?
In the case of a repayment loan, the bank and the customer agree in the repayment plan to pay once a year 10 percent of the loan amount in effect at that time. The annual repayment makes it possible for the loan to be repaid faster. The price of this financing is reflected in the interest rates. Compared with a loan without repayment, the interest on a repayment loan is significantly higher. From this perspective, the lender can pay for the option of repayment separately. The repayment loan is an option. This means that the Borrower is not obliged to actually pay the capital annually. If there is a premature termination of the loan agreement, the repayment factor must be taken into account separately when calculating the remaining debt. Regular errors are made when calculating the early maturity because the repayment option is only considered until the time of termination or not at all.
The annuity loan, on the other hand, is a loan that pays constant fixed rate installments. Special repayments do not exist.
An annuity loan is designed so that the remaining debt is zero at the end of the loan term. As interest rates decline over time, repayments increase, with rates for credit always remaining constant. The condition of this form of loan is that borrowers and lenders have agreed on a fixed interest rate for the entire duration of the contract. Both forms of loan are special forms of a loan.
Remaining term and residual debt: A pair that influences the prepayment date
The calculation of the prepayment date is influenced by the remaining term and the residual debt. The longer the remaining term of a loan at the time of termination, the higher is the residual debt as a rule. But it must be remembered that, even though the situation is better with market-wide higher interest rates compared to the interest rate at the time of the loan conclusion and the early loan termination should lead to low or no financial disadvantages for the credit bank, the official calculation of the lender to be awaited. The consent to the loan termination remains with the bank providing credit. If you do not plan to switch to another lender, you can facilitate the acceptance of the loan cancellation by announcing notice of termination in the medium term or in the long term to sign a new loan agreement.
Information about the residual debt insurance in relation to the prepayment penalty
The residual debt insurance is used when borrowers want to hedge against death, unemployment or sickness or disability. Due to the long installment loan term over a period of 10 years, the residual debt insurance is mainly used for such loan agreements. As a consequence of a residual debt insurance settlement, a commission may be due to the credit intermediary or the bank. Furthermore, the interest rate can be significantly higher than the interest on a loan agreement without residual debt insurance. If the lender requires the conclusion of a residual debt insurance, the fulfillment by the borrower must be recognizable in the effective interest rate. In this case, the conclusion of the residual debt insurance leads to consistent to better loan terms.
These reasons speak for the early replacement of a loan:
- The new conclusion of a loan offers significantly better loan terms
- Compared with the 1 percent or 0.5 percent remaining debt settlement, the payment of the prepayment date is more favorable
- The real estate financing must be dissolved as there is a change of the real estate owner
- The borrower wants to raise a higher loan and the lender refuses
- The borrower has died and left an inheritance, with the remaining debt and prepayment being settled
What to do if the prepayment penalty is higher than the residual interest?
When calculating prepayment for a loan, it is not only the residual interest that influences it. Because in addition to the planned and paid by loan cancellation no longer according to the agreed repayment plan remaining interest amounts, the lending bank incur further costs. These are reflected, inter alia, in the processing fees and the loss of new investment or reallocation of the money in the form of a loan. Since the exact calculation of the prepayment date is not exactly regulated by the German legislator, each credit institution sets its own priorities in the place of the damage description. It is again reminiscent of the 1 percent or 0.5 percent remainder, so it becomes clear:
Banks can not extend the claim for damages in the form of the prepayment request without restriction.
If you have already submitted a loan cancellation for your installment loan, do not transfer the prepayment date without having the prepayment and residual debt calculation and cancellation policy checked in the loan agreement. With a bit of luck, your loan agreement contains a faulty cancellation policy, invalidating the prepayment request. Almost 60 percent of all loan agreements issued in the last two decades have a faulty cancellation policy. To date, more than half of the faulty cancellation policies have gone undetected and countless euros have been paid and not recovered by the borrower, although this is possible. You can get back the prepayment penalty in case of an error in the cancellation policy. If you have terminated a loan agreement in the past, you should also submit it to the capital law attorney to verify that partial or full reimbursement of the prepayment date is possible.
What options are there to calculate the remaining debt?
Take advantage of this opportunity and make use of free prepayment prepayment. You can use our prepayment penalty calculator for this. Enter contract-relevant data such as the tied interest rate, installment amount, frequency of installment, contract duration. In a few seconds, the calculation of the prepayment date is completed. The result of the prepayment penalty calculator corresponds to the potential prepayment request of the lender. If you would like to work with an expert right from the start, contact the specialist lawyer. He will calculate the remaining debt and plan the further course of action with you, for example a follow-up financing. If you have a good relationship with your bank adviser, you can ask him to calculate the remaining debt and the due date. In most cases, the calculations then provided are non-binding statements that can only be used retroactively to clarify an excessive prepayment date.
Termination for residual debts by the bank
An awakening is available to all borrowers whose loans have been terminated by the credit bank. In this case, the legislator stipulates that the borrower as well as the lender are entitled to the early repayment penalty. In this case, it is worthwhile to establish contact with the specialist lawyer and have the loan agreement and the termination by the lender checked. If you can assert the right to a prepayment, you can expect a four to five-digit prepayment penalty depending on the term of the loan agreement at the time of termination. The process from the customer’s point of view is referred to as a claim for damages after termination of the loan agreement by the lender.
The prepayment penalty may not exceed 1 percent or 0.5 percent of the remaining debt
Compute residual debt is worth it if you do not want to unnecessarily pay too high compensation. The Prepayment Compensation Calculator offers a free and fast way to calculate the appropriate amount. With the help of the prepayment calculation and the rules of thumb, the payment of excessive receivables can be prevented, or an effective rescheduling or follow-up financing can be initiated.
The rules of thumb for residual debt state that the prepayment date may not exceed 1 percent or 0.5 percent of the remaining debt in the case of a foreseeable loan repayment under one year.
Get support from the specialist lawyer for capital law
A specialist lawyer for capital law is familiar with topics such as prepayment, residual debt, interest, installment, repayment plan and annuity loan. This background knowledge makes it possible to bring a loan agreement to a good, premature end, without having to accept an excessive or unlawful claim for prepayment by the loan bank. After you have calculated the prepayment date with the prepayment penalty calculator, all relevant facts are in front of you. According to your determination and time, now has the right moment to contact the lawyer. The lawyer will examine the loan agreement according to applicable law, calculate the remaining debt and show you the possibilities. Due to many individual case decisions on the subject of maturity, debt restructuring and residual debt, the expertise and skills of the lawyer should never be underestimated. Depending on the lender, the borrower and the amount of the remaining debt, the involvement of a lawyer can save a five-figure amount of money.
Not every mortgage lending comes to a happy end
The completion of mortgage lending is usually associated with hopes and confidence in the future. The awakening comes at the latest when it comes to the intention to terminate the loan agreement and the bank makes use of its right of early repayment penalty. To ensure that the once-for-home loan, and in the best case your own benefit, remains positive, termination before the end of the term is sometimes the only way. Do not stay out of convenience in an existing loan relationship.
Checking past and current loan agreements is worthwhile
Make use of the contact with the specialist lawyer for capital law and have a current prepayment claim checked as well as an already paid prepayment claim. Do not give up the chance to get an amount in three, four or even five-digit amount issued or refunded. If the consultancy costs for the lawyer are not covered by your legal expenses insurance, it is worthwhile to entrust the lawyer anyway if you have the prospect of repayment or remission success. In addition, a loan agreement should always be checked for the correctness of the prepayment date before a prepayment date. Alternatively to the specialist lawyer you can get support from a regional consumer protection. As soon as the situation between you and the lender intensifies, the contact with the specialist lawyer should be established. Calculating the residual debt can be complicated, but a professional knows best what to do. You should also inform yourself about the so-called follow- up financing in order to get your loan back into order. Rescheduling can also be an alternative.