If the bank has canceled the loan and now demands the full amount back, the child has already fallen into the well. Now it is important to keep a cool head in order to save yourself from the situation and not to make it worse.
What is the usual procedure?
Anyone who is unable to service one or more current installment loans – i.e. cannot pay the monthly installments due to a financial imbalance or other reasons – is first given a more or less friendly warning from the lending bank to pay the outstanding amount. As a rule, fees are also due for an uncovered direct debit. Therefore, it is not recommended to simply cancel or debit a charged credit installment.
If – in the event of the arrears in arrears – you fail to comply with the first and possibly a second reminder and do not settle the outstanding claims from the loan agreement, the bank will usually terminate this by registered letter and the so-called debt balance is due for immediate repayment. Usually with a notice period of two weeks.
This right of termination is based on § 498 BGB (total due date for installment loans), according to which the lender is entitled to terminate if the borrower is in arrears with two successive installments and at least 10% (with a term of more than 3 years of 5%) of the nominal loan amount is (paragraph 1). Before that, however, the written reminder with a two-week deadline must have been fruitless (Paragraph 2). At the latest when the deadline is set, the borrower should also be offered an offer to discuss the situation in an agreed manner.
Prepayment penalty is not legal
If the bank cancels a loan on its own accord, according to the BGH rulings from 2016, it is not entitled to the so-called prepayment penalty, i.e. compensation for lost interest. This can quickly be high five-digit amounts, especially for real estate loans. If you have already paid these, you can try to claim them retrospectively. However, you should bring a lawyer who is specialized in this on board.
It has also happened that the bank terminates a loan due to a significantly changed financial situation (Section 490 BGB). This can happen particularly in the case of unemployment or the repayment of student loans. Even if liabilities to third parties cannot be serviced, the bank can – with otherwise faultless payment in installments – terminate the loan with reference to its terms and conditions.
Incorrect information when applying for a loan or the financial situation can also lead to termination. There is also a legal requirement if the security provided suffers a substantial loss in value.
In any case, an attempt should first be made to seek a conversation with the personal bank advisor or a responsible employee of the lender and to signal willingness to solve the problem.
On the other hand, if an overdraft facility is canceled , the bank is usually of the firm opinion that the debtor cannot free himself from the so-called permanent overdraft – the monthly income is therefore foreseeably not sufficient to adequately debt the account. Although the bank earns very good money from the mostly double-digit overdraft interest, it is also obliged to counteract the debt of its customers. A Credit Bureau entry is not made if the payment is made on time (usually six weeks).
How should the full amount be paid if the last installments could not be paid? Here are some solutions:
If the defaulting installments are not caused by financial problems, but rather, for example, by accounting or personal problems, or if you convince the bank of a good financial situation, there is a chance that you can reach an installment agreement on the total loan amount due. This is set for up to twelve months and therefore means higher monthly rates than before, but also the chance to meet the often four or five-digit sums without reserves.
Most of the time, the loan termination is a situation that has not been mastered before. If you want to accept professional and experienced help, you should contact a debt counseling service in your area.
This help should be accepted especially when it comes to substantial sums – such as home loans. Here borrowers easily take on the monthly installments and then face high five- or even six-digit claims.
When the bank has canceled the car loan
In the case of vehicle financing, the bank usually withheld the vehicle registration document (today registration certificate part II). If you are now in arrears with one installment, the bank will send a message to the borrower stating that the open installment must be settled immediately and, from the second open installment, issue a termination of the contract without further notice. The case is then gladly handed over to a collection company, which is supposed to collect the amount and tow the vehicle as security (attached).
If it is not too late, the installments should be paid in full or at least a conversation with the bank sought to arrange a deferral or extension of the repayment if necessary.
All in all, non-payment of the installments is always associated with higher costs (collection, appraiser, recovery) and should be avoided under all circumstances and with all possibilities.
If the bank has canceled the house loan – what to do?
In the case of existential loans such as real estate financing, the involvement of an experienced lawyer can pay off. This checks the loan agreement and the termination and can determine whether the termination has been effectively pronounced and whether the necessary requirements have been met.
However, if the termination is effective, there are several options depending on the prevailing situation:
- Find a conversation with your personal bank advisor. Tell him the situation honestly and try to convince him that your situation has improved. The prospect of repayment of higher one-off amounts (e.g. 10 percent of the canceled loan amount) can also work wonders.
- If there is no solution in sight at the previous bank, you can try to get a real estate loan from another bank – which is not impossible when the creditworthiness is now solid again. In most cases, the previous bank’s prepayment penalty is added to the remaining debt.
- In addition to the debt counseling mentioned above, which helps you to assess your situation, the
- direct sale of the property can be an option, which in many cases is more lucrative than the threat of foreclosure
What happens if the canceled loan cannot be paid?
Debt restructuring and take out additional credit?
Hopefully, anyone who wants to pay a canceled loan with another loan has understood the warning shot. If there is really a potential lender, in this case, due to the negative Credit Bureau entry from the previous credit obligations, a deterioration in the credit conditions can be expected. However, if you can negotiate better terms (lower rates, better interest rates) with another bank, this option of rescheduling can make sense.
Caution must be exercised with potentially dubious providers who like to take advantage of the difficult situation of the borrower (“loans upon cancellation”, “loans without Credit Bureau”, “loans in difficult cases”). These can further worsen the situation and cause the customer new difficulties.
It should be checked, however, whether you can borrow money privately and ideally without interest. In any case, your own financial situation must be strictly analyzed in order to save and improve the situation sustainably.
Those who are unable to raise the required amount and are in employment must confront their employer with the issue of garnishment. In most cases, there is a wage assignment clause in the loan agreement, which authorizes the bank to disclose the wage assignment to the employer. If the garnishment of wages has already been excluded by the employment contract or the employer does not agree to it, the next stage of the claims manager comes into play.
If, with the best will in the world, you cannot repay the entire loan amount, comparison offers have also led to success in the past. The bank waives part of its claim and thus avoids the risk of not receiving anything from the outstanding loan amount.
If all of the previous options are not possible, the bank will first have a judicial reminder sent to you. This can simply be applied for and will only be checked formally and not in terms of content by the dunning court. The further steps in the event of non-payment and without lodging an objection are the enforcement notice and the enforcement.
If the bailiff is also unable to collect or pledge anything, there has also been the possibility of private bankruptcy for some years. However, this should be the very last resort due to the problems and inconvenience that this entails.
Limitation of termination
The possibility of a statute of limitations three years from January 1 after the termination is very very low, since the bank knows this period and will not let it pass without further measures.