06.04.2023
RIGHT OF REFUSAL FROM A CONSUMER CREDIT AGREEMENT
Have you ever made a rash money decision that you later regretted? This is exactly what happens to quite a few people who have decided to resort to the services of a lender. The good news is that in this case, there is a way to change your mind without incurring large losses.
According to the Law on Consumer Credit, every customer who has taken out a loan has the opportunity to withdraw from the concluded contract within 14 calendar days from signing it (or from the day of receiving the conditions under it). Whether you've realized that you don't really need a loan or you can't afford it, the reason doesn't matter.
In this situation, you do not owe compensation or a penalty and there is no need to give any explanation to the creditor. However, you will have to pay back the amount you borrowed, along with interest and other non-refundable fees paid by the lender.
Get ready to lose some money
Unfortunately, if you refuse a loan, you will have to return not only the amount received, but also all interest and fees related to its granting. For example, the lending bank may charge an "administrative fee for credit approval and contract signing."
In the general terms and conditions of the bank, which you automatically agree to when signing the contract, it should also be written that the administrative fee for loan servicing is paid when signing the loan contract to the current account from which the loan will be serviced.
In this case, the collected fee is not refundable, even if the loan is not used. From this point of view, the bank has the right to retain it since you have agreed to this condition by signing the terms and conditions.
How is the waiver done?
First of all, you must notify the creditor in writing of your desire to terminate the contract. If you don't do it and just return the amount, this may not be considered as a cancellation of the contract, from which you will lose a lot, namely - at a future time you will have to pay the originally agreed interest on the loan.
The notification must be sent within 14 days of the conclusion of the transaction. If you have chosen to have the necessary documentation accompanying the contract sent to you by post, the period in which you can cancel the loan is 19 days. The added 5 days are considered sufficient to receive the documents.
The next step is to return the money. You must do so to the creditor's bank account within 30 calendar days of the date on which you sent a message that you are withdrawing from the contract.
Even though you are essentially giving up on the deal you made earlier, you still won't get back an amount equal to what you withdrew. As already mentioned, you will have to pay the agreed interest on the loan for the time that the money has been "sitting" with you.
If you have difficulty calculating the exact amount, you can contact an employee of the credit company. However, one thing is certain – the amount will be much less than what you would eventually pay back by periodically making your monthly installments.
Please note that the right to refuse a credit agreement applies only to loans worth more than BGN 400.
Entry of the loan in the Central Credit Register
Sometimes it happens that even unutilized credit is entered in the Central Credit Register. Despite the logic that this should not happen, there is one feature that can cause the credit to be registered in the Central Credit Register.
The register includes not only loans that have already been granted, but also those that have been approved but not yet granted. If the loan account for your credit has not been closed after you have not used the credit, it may still be present in the Central Credit Register.
If this happens to you, you should contact the bank branch where you signed the credit agreement and ask for a request to close the loan. This is the right approach to clear credit from the Central Credit Register.
Early repayment of a loan
If at some point you were in financial difficulty and had to take out a loan, and now you have free funds, you should know that you can repay it early at any time. In this case, the creditor does not have the right to charge you the interest and costs for the remaining part of the contract term.
The borrower does not owe compensation or a penalty when the repayment of the loan is carried out in a period during which the interest rate under the loan agreement is not fixed, the repayment is made on the basis of a payment under an insurance contract aimed at guaranteeing the return of the loan, or the contract is in the form of an overdraft.
In all other cases of early repayment of the loan by the consumer, the creditor has the right to compensation. However, it cannot exceed 1% of the early repaid loan amount with a remaining contract period of more than one year and 0.5% of it with a remaining contract period of less than a year.
Compare different offers quickly and easily
To avoid taking out a loan that you later have to refuse, first compare all available offers before making a decision. Although this takes more time, it will probably save you a lot of headaches and money down the road.
Before you sign a contract, the creditor must provide you with a standard European form with information on consumer credit. This document is intended to help you understand as well as possible the terms and conditions of any loan agreement you may be considering signing.
The European form includes:
- the main characteristics of the contract;
- the amount of the loan and its price;
- the annual percentage of expenses (APЕ – a single value, meaning the total amount of expenses under the loan, including interest, commissions, fees and any other type of expenses);
- the number, frequency and amount of all your payments;
- information on important legal aspects.
In this way, you will be able to compare loan offers from different providers and choose the most suitable one for you. If the creditor has not provided you with this form, you have the right to request it.
