The borrower learns of the termination of the loan agreement shortly after he stops paying his debt. Find out what the termination of the loan is and what it means for both parties to the contract.
Withdrawal from the contract and termination of the loan agreement
The borrower has the right to withdraw from the loan agreement. The termination of the loan agreement is different. The lender is entitled to do this. Cancellation of a loan may be raised by the borrower within 14 days from the date of the contract. The consumer’s right to withdraw from the contract results from the provisions of the Consumer Credit Act.
Termination of the loan agreement is another thing, although it sometimes happens that these terms are sometimes confused. Termination should be understood as the lender’s declaration of intentions regarding the conditions under which he will request a refund. The lenders also received the option to terminate the loan agreement on the basis of the provisions of the Consumer Credit Act. According to its content, two unpaid installments are enough for the lender to terminate the contract with the debtor.
If the loan agreement does not contain a specific repayment date, the debt, according to the provisions of the Civil Code, should be settled within 6 weeks.
Importantly, to terminate the loan agreement, you have equal rights to:
- physical people,
- loan companies,
- banking institutions.
The loan agreement may also be terminated with private loans.
How should the borrower react to the termination of the loan agreement?
Regarding the termination of the loan agreement, the borrower’s ideal course of action includes:
- checking the effectiveness of contract termination,
- making a payment or contesting the effect of termination.
For the borrower, termination of the loan agreement means, in fact, the lender’s resignation from further cooperation with him, and therefore the need to settle the outstanding amount. It should be noted, however, that under the current legal status, when consumer rights were extended, termination of the contract without prior call for repayment of debt is treated as invalid. This interpretation of the regulations was confirmed by the Judgment of the Court of Appeal in Katowice of June 6, 2019. 1
To assess the effectiveness of the termination of the loan, it is worth carefully reading the content of the letter received from the financial institution. First of all, check that the loan agreement number matches. If it is not possible to increase the effectiveness of the termination, the borrower is obliged to repay the loan in full, including costs and interest. The repayment in accordance with the previously adopted schedule ceases to apply. The repayment should be made on the terms agreed with the lender or specified in the declaration of intent. The six-week notice period allows the borrower to organize funds.
Importantly, if the borrower pays the payments in a timely manner, the lender cannot demand repayment of the loan in advance.
Ways to terminate the loan agreement
In order for the loan agreement to be terminated in accordance with the law, you can use:
- notice by agreement of the parties,
- notice on terms specified in the contract,
- termination on the terms defined in the Civil Code.
The first method involves the development of a consensus by both parties in the form of loan repayment terms and the acceptance of a deadline to cover the commitment. The second method is to adapt the termination procedure to the indications in the contract. If the lender has provided for such a provision in the contract, he should comply with it. For example, he may agree that the loan agreement will be terminated as a result of being in arrears for 3 months from the time the loan was granted. The third method applies only to contracts concluded for an indefinite period.
The Civil Code provides that the lender has the right to terminate the contract with a 6-week notice period. It should be remembered that for a fixed-term loan agreement, it may be terminated only if the agreement provides for such eventuality.
How do you write a termination agreement?
To terminate the loan agreement, a sample letter can be found online. The regulations do not require a written notice to terminate the loan agreement in any case. This should be kept for a loan agreement for an amount exceeding $ 1,000.
Interestingly, if the loan agreement was concluded in writing, its termination may be expressed by means of a declaration of intent, even in electronic form, provided that it is provided with a secure electronic signature. Such termination of the loan agreement is considered valid and effective.
The termination of the loan agreement must include:
- contract number and date of conclusion,
- determination of the due state,
- bank account to which repayment should be made.