If there is a financial opportunity, the borrower seeks to repay the debt to the bank ahead of schedule. To do this, some lenders pay amounts in excess of their planned payment. Thus, they reduce the amount of the principal debt or the period until the fulfillment of the loan obligation.
How is the loan recalculated in case of early repayment? If the borrower repays the loan ahead of schedule, the bank makes a certain “update”, reducing the term or size of the payment. This allows you to save on the total amount of overpaid interest, because if the lender repays the debt before the planned payment, it will not accrue loans on the loan.
Repayment: in whole or in part
So, loan debt, whether for a mortgage, a consumer loan, etc., can be repaid either in full or in part. If the borrower decides to fully repay all the debt, then the principal debt is paid, which is set at the current date.
If the loan is partially paid, the client at the time of payment is paying an amount in excess of the monthly payment. In this case, the debt is not fully closed, however, the period of payments or the amount of the monthly amount may be reduced. In this case, the procedure must be done in the bank itself, through operators or loan managers. Otherwise, the deposited funds will simply be on the account until the next payment.
It is unprofitable for banking institutions if their clients pay a loan ahead of schedule - with such repayments they lose their income from interest on each loan they pay.
Recommendations for early loan repayments
As a rule, for individual banks, this procedure is carried out on different conditions. However, for most of them, the general rules for early repayment are observed:
The client must go to the bank in which the loan was issued, and leave an application for credit recalculation upon early repayment. It indicates what the client intends to do on the loan (pay, review the conditions) and what is the amount payable.
Next, the bank considers the request. To find out if a positive decision was made, you can call the hotline or contact your manager. Usually consent is by default, but sometimes the review can last about a week.
Then the bank assigns the period during which the payment must be made. This is usually the date that is approved in the payment schedule. It is not necessary to pay on this day - funds will in any case be on the account on demand. If the loan is paid in full, then a specific date is not indicated, since it is no longer necessary to make changes to the schedule or the amount of monthly payments.
What documents does the bank issue after recalculation
Recalculation for partial early repayment of a loan is provided on the day after payment is made. The client comes to the bank, and managers provide him with a document in the form of an updated payment schedule.
If all the debt is paid, then the borrower also contacts the bank, and he is provided with a letter of inquiry that the loan agreement has been repaid and closed. As a rule, a notice is issued on the official letterhead of the organization with the signature of the head / head of the credit department. Such a letter is sometimes required to obtain any permissions or inquiries. For example, to obtain a credit history, if the BCI did not receive information on the repayment of a debt of an individual.
Possible debt recalculation options
The above scheme is the most common and is used in almost all banks. However, in some banks other conditions may apply:
Some banking institutions calculate a new payment schedule as soon as a partial payment of the debt has been made, and not after the planned date.
A new schedule is provided in advance, prior to payment. Its entry into force anyway begins after the actual repayment.
In some lending institutions, you can change the schedule yourself using online banks. The client pays the maximum amount in excess of the monthly payment, and the system immediately generates an updated schedule. However, if the loan is repaid in full, after payment you still need to go to the bank to confirm the closure in writing.
How to recalculate insurance for early repayment of a loan
As a rule, credit insurance is immediately included in the terms of the contract. Of course, whether or not to include insurance is everyone’s business, the bank is not entitled to forcibly add this item to the contract. However, insurance is still often used by borrowers. More often this item is added to increase the likelihood of obtaining approval from the bank, and to a lesser extent, to really insure against risks for the entire lending period.
The amount of insurance may be insignificant if the loan is taken for a short term (half a year, a year), or it can become impressive if the contract is drawn up for a period of, for example, 10 years. Here the insurance premium will be tens of thousands.
So is insurance recalculation done when repaying a loan ahead of schedule? It is not that simple. The insurance contract can be terminated at any time, however, refunds in the form of insurance premiums are not carried out, unless otherwise specified in the contract (in accordance with Article 958 of the Civil Code of the Russian Federation). Clause on compensation of expenses should be spelled out, so you should first thoroughly study the terms of the insurance contract.
Sberbank: how to recalculate
Savings Bank, as one of the largest banks in Russia, provides customers with recalculation of loans for early repayments.
So, by recalculating a loan upon early repayment at Sberbank, you can change the size of the main debt balance, as well as reduce the interest rate on the loan, due to a reduction in the main debt.
Before this, you need to make sure that this procedure is provided for in the loan agreement, whether penalties or commissions are charged for premature repayment. Indeed, it is unprofitable for credit institutions to reduce interest, even if the client transfers a payment that exceeds the schedule. However, it should be borne in mind that this issue is now regulated at the legislative level, and banks now do not have the right to limit unscheduled payments.
In order to repay the loan in whole or in part, you need to write a statement. It indicates the amount, date of payment and account number (or contract number).
Allocation: deduction methods in Sberbank
If the debt will be repaid in full, it is necessary to clarify the balance with the loan manager, and to the nearest kopeck. If the main debt is underpaid or overpaid even for a ruble, the loan will not close. You need to make a transfer to the account on the current day and in accordance with the amount in the application.
After the payment is made, you can see the amount of the loan loan recalculation in a special calculator. Specifically, there is no calculator on the website of Sberbank, but other sources can be used. Of course, the data on the online calculator are calculated as approximate information.
The specifics of loan products at Sberbank is that they are provided mainly as annuity payments. So, even if the borrower makes an early repayment of the loan, interest is not recalculated, since their value is constant for the entire period of payments. Only the period of “interaction” with the bank will be reduced.
With full repayment, everything is standard: you need to make sure that the contract is fully executed. To do this, the bank provides a certificate of debt closure and the absence of claims against the borrower.
With early repayment at Sberbank you can get part of the insurance premium. It is formed on the basis of the period during which the insurance program will operate.
How to recalculate in VTB24
Unlike Sberbank, this institution offers the lender two ways to partially repay the debt - either by reducing the total term or by reducing payments.
The following features can be distinguished in VTB24 for loan allocation for early repayment:
The application must necessarily indicate the further condition of the loan (reduction in the amount; reduction of the term).
A calculator is available on the VTB24 website, with which customers themselves can calculate approximate data online.
The application must be submitted at least one day before the planned payment.
You can repay early on any day or on a schedule.
Recalculation does not apply to mortgages.
As for insurance, it is possible to terminate the contract unilaterally, but without a refund. So does it make sense to terminate it? Nevertheless, with early redemption bilaterally, you can receive part of the insurance premium, in proportion to the period until the end of the program agreement. True, how to get a bilateral agreement is a difficult question.
Conclusion
So, doing loan recalculation for early repayment in any case is beneficial for borrowers. It is in the interest of banks to receive stable interest from loans, so that they can complicate this process, for example, by including in the contract certain sanctions or commissions for early payment. Nevertheless, it is possible and necessary to reduce the size of monthly payments or the payment period in order to stop paying banks N monthly amounts of their income every month.