Usually a installment loan for a fixed term is completed, an explicit termination at the end of the contract is not necessary. By settling the last installment, the contractual relationship with the respective bank automatically ends. However, some borrowers would like to terminate the loan early. In this case, the outstanding balance is to be paid in one amount.
Notice of termination of a loan
The deadline by which a installment loan can be terminated depends on the date of the conclusion of the contract. If this is before 11.06.2010 still apply the old regulations. After these there is a notice period of three months with a installment loan.
In addition, early termination of the loan is possible after six months at the earliest, whereby the bank can withhold the processing fee and charge further fees. For newer contracts there is no notice period for a installment loan. However, the lending financial institution is entitled to charge a prepayment penalty. Both under the old and new regulations, early termination is therefore associated with financial disadvantages.
Even if there is no notice period for an installment loan, this decision should therefore be well thought out. With residual terms of less than twelve months, the Bank may estimate a prepayment penalty of up to 0.5 percent of the balance, with longer maturities of up to 1.0 percent. However, these values represent the absolute upper limit, many banks require lower compensation or allow their customers free special repayments.
Regardless of whether the installment loan can be dissolved without notice or according to the earlier regulations a deadline is met, it depends ultimately on the exact terms of the contract, if an early termination is advisable. If there are no or only minor costs, it is sensible to wind up the loan if this is financially possible. On the other hand, if high fees are incurred, it may be more advantageous to continue the installment loan without notice until the end of the term.