Consumer credit means credit a lender gives to a consumer as a loan, a right to pay later, or other similar financial arrangement. Consumer credit includes credit card loans, home and student loans, and payment by instalments.
Early repayment of consumer credit is your legal right
It is your legal right to pay back a loan early, even if this is not mentioned in the loan contract. If you repay the full loan or part of it early, the lender must deduct from the outstanding amount any loan costs that relate to the loan period you will not use.
However, the lender has the right to collect in full the actual costs of setting up the loan that are itemised in the loan contract.
The lender may claim compensation
The lender may claim compensation for early repayment if you pay back the loan early during a period for which a fixed interest rate has been agreed.
If you repay the loan at least one year before the loan contract ends, the lender has the right to claim as compensation at most 1% of the loan amount you paid back early. If you repay the loan less than one year before the contract ends, the compensation may be at most 0.5% of the loan amount you paid back early.
However, the lender may only claim as compensation the amount of interest that you would have paid during the period between your early repayment and the ending of the loan contract.
When can the lender not claim compensation?
The lender may not claim compensation for early repayment of the loan if:
- your early repayments of the loan in the last year have been at most EUR 10,000
- you are repaying the loan through a loan protection insurance policy
- the loan is based on a credit contract concluded as part of a current account.
The lender’s right to compensation in home loans
The lender may claim compensation for early repayment of a home loan if the loan amount is over EUR 20,000 and the loan has a fixed interest rate, or the determination period of the reference interest rate is at least three years.
The maximum compensation that the lender may claim is the loss resulting from a lower interest rate received during the remaining fixed-term loan period or determination period of the reference rate. More detailed regulations on how the losses are calculated are issued by the Financial Supervisory Authority.