The penalties and bank charges are fixed at the signing of the total or partial credit redemption. They are called prepayment penalty or prepayment penalty.
Why buy back credits?
The main argument remains the more or less significant decrease in the overall monthly payment of credit and therefore the debt ratio of the borrower. The acquisition of credit is subject to a legislative and regulatory framework. It must concern the repayment of two previous minimum claims, one of which is still in progress. Redeeming a single credit, whether real estate or consumer, is excluded from this scheme.
This system is subject to this Code of Consumption, but the total amount of the ceiling of this new credit may exceed 75,000 dollars, which makes it possible to have a cash contribution.
Penalties on a loan redemption
The bank can not oppose the repurchase of credit. Note that if the purchase concerns a revolving credit, the borrower must immediately repay the lender. If the loan redemption is for the entire amount outstanding, the lender must remind the borrowing client that it has the option of terminating its contract by offering to send the letter of cancellation signed by the borrower free of charge.
As of May 1, 2011, repayment penalties may be applied on the credits repayable beyond a threshold of 10,000 dollars reimbursed by period of 12 months. (Lagarde Law)
Bank charges when redeeming credit
Fees are sometimes applied. All these expenses are fixed at the signature of the loan that the purchase is total or partial. They are called Early Redemption Compensation or Early Redemption Penalty (IRA or PRA).
For consumer loans:
The prepayment fees may not exceed 1% of the amount of the loan if the amounts are greater than $ 10,000 and the time between the early repayment and the end date of the contract is greater than 1 year. Fees can not exceed 0.5% of the loan amount if the period is less than 1 year. They are not applied for revolving credit, revolving credits or lease with option to purchase. For a partial credit surrender, the minimum repayment of three times the sum of the next installment (generally fixed by decree) must be provided.
For real estate loans:
The indemnity must not exceed six months of interest of the sums reimbursed at the average rate of the credit and 3% of the capital remaining due before repayment. Advance repayment fees do not apply to real estate loans obtained from 1 July 1999 if the reimbursement is motivated by the sale of housing, a change of location related to a professional transfer, a loss of employment or a death of the borrower or co-borrower.
Regarding the loan repayment date, it is advisable to calculate the day of the credit due date to avoid additional interest.