When making any deposit, the client signs a corresponding agreement with the bank. In it, in addition to the deposit amount, the basic conditions of the deposit must be indicated: the term of the deposit, the possibility of early termination of the contract or its extension after the expiration of the deposit, the possibility of replenishing the deposit. Each of these nuances is undoubtedly extremely important. However, the text of the contract itself is sometimes so specific that it is completely incomprehensible to the layman about what is being discussed in one or another of its paragraphs.
For example, not all bank customers are aware of what the extension of the contract is, and how automatic differs from that which is carried out by signing an additional agreement. But the way to prolong the contract is extremely important for the client. If the contract is renewed automatically, this means that at the end of the contract the client should not contact the bank to conclude another one - the bank will re-arrange the deposit for the same period. That is, the client comes only if he needs to collect money or change something in the contract. When the automatic extension of the contract is not provided, the money at the end of the term falls into
the client’s
current account and interest ceases to accrue on them. That is, the depositor, not knowing what the extension of the contract is, and not realizing that it is not provided for in his contract, continues to keep money in the bank without receiving interest.
There are other cases. For example, when a client is about to withdraw money from an account and knows that the deposit has expired, he arrives at the bank a week later and finds out that he cannot receive funds for the deposit, because the contract has been extended and must now be terminated. In this case, of course, automatic prolongation of the deposit is indicated in the contract. He will ultimately take his money, but he will have to make additional efforts for this: write statements, come again, etc. But a careful study of the contract would help in both cases save time and nerves.
The concept of extension of the contract also applies to lending and some other areas of banks. In particular, many borrowers, who were taken aback by the recent financial crisis , know about the extension of the contract . When people got loans and after some time realized that they could not repay them, they began to look for possible ways out of the situation. In addition to the sale of collateral property, which was massively offered by banks on mortgage and other secured loans, one of the solutions was to extend the term of the loan agreement in order to minimize the monthly payment. In such a situation, of course, there was no talk of any automatic extension. In order to extend the payment term, the client had to contact the bank himself, write a statement and convince him that the new payment would be possible. Only in this case did he get the opportunity to sign an additional agreement and reduce payments.
If we consider the question of what is the extension of the contract, but without reference to loans, deposits and banks in general, then literally this term means “extension of the term”. That is, to prolong the agreement means to postpone the final date for its implementation, naturally, by mutual agreement of the parties.