Various unforeseen situations such as a broken car or a sudden damage to the house, but also a short-term financial bottleneck, because the employer is late with the payment, can cause that you suddenly need a loan. The banks, especially the direct banks, entice you with fabulously low interest rates, especially now that the key interest rate of the european central bank has reached its historic record low. A loan application is quickly made; various documents to check your creditworthiness must be submitted. The application and documents are checked, a schufa report is obtained, and if all requirements are met, the loan is disbursed. Now it can happen that your bank cancels your credit agreement – the bank has various reasons for this. In various cases, the bank is entitled to terminate the loan agreement, but termination is not always actually legal. Therefore, if you have received a notice from your bank, you should examine the process carefully and seek the advice of an expert.
What you should know about the cancellation of the loan agreement by the bank
If you have defaulted on two installments of your loan, the bank is entitled to terminate your loan agreement. However, this is only legal if the bank has sent you a written reminder beforehand. However, it does not have to come to a cancellation at all. If you can not pay the installments, you should inform the bank in time, the installments can then be deferred. Termination of your loan agreement by the bank is also possible if the bank discovers that you have made false statements about your financial circumstances in your loan agreement. In the worst case, the bank can even terminate the contract without notice, even without an explanation. In most cases, the reason for termination of the credit agreement by the bank is gross misconduct on the part of the customer. The civil code, ยง 498, specifies the termination rights of banks. The bank is entitled to terminate the credit agreement if the borrower has not paid two installments and ten percent of the loan amount. In the case of loans with a term of more than three months, the bank can already terminate the loan if five percent of the loan amount is in arrears. For the termination to be legally valid, it must be preceded by a legally valid reminder giving the customer 14 days to pay the outstanding installments. In the reminder, the bank must offer the customer a discussion to find a solution together. With this conversation it is often possible to avoid a cancellation.
The bank is not always really in the right
The bank is not always in the right with the termination of the loan agreement. If the bank has sent a reminder, but the debt is too high and cannot be paid within the set deadline, you as a customer do not have to simply accept the cancellation. In case of an overdraft facility the situation is different, it can be terminated by the bank within 30 days without prior reminder. The bank is justified in doing so if it believes your monthly income is too low to pay the line of credit. The overdraft facility can even be terminated without notice!
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You can prevent a termination of the credit agreement
If you find that you cannot pay the installments on time, you should inform your bank. If you haven't done so yet and the bank has sent you a friendly request to pay the installments, it's time to react and talk to your advisor – the bank can find a solution together with you. You should seek advice as early as possible if you find yourself in financial difficulties due to an unforeseen situation such as unemployment, illness or divorce. The loan rates can be adjusted to your situation, this is possible temporarily, but also permanently.
Talk to your bank advisor and subsequently the conditions for your loan will be adjusted, you can prevent a negative entry at the schufa, which will further deteriorate your credit rating. If an agreement with the bank is not possible, you should seek advice from an expert. If termination is nevertheless unavoidable, a recognized debtor and consumer insolvency counseling service can help you; it is free of charge. It can be particularly complicated with a real estate loan, as foreclosure threatens if you can no longer pay the installments. You should seek timely advice from a lawyer. In order to keep your property, you should try a loan application with another bank.