You hear it more and more. Termination of credit agreements and / or adjustment of the conditions (such as an increase in the surcharges and interest). An underexposed topic is the penalty interest charged by the banks. What can you do about it?
Early repayments of fixed-term loans
If you have a business loan with a fixed term at the bank (except for a current account credit), you will often be confronted with a penalty interest if this loan is repaid early . This is not only current with the financing of commercial real estate. You will also come across this clause with ordinary financing for your company. This clause is not explicitly stated in the general banking conditions, but is always
included in the credit agreement itself.
Head bank and penalty interest
Even if your credit is canceled against your will , for example as the Deutsche Bank has announced, you will also be confronted with penalty interest and, incidentally, also costs of refinancing the credit, et cetera. The issue with Deutsche Bank is another, raising an objection to the termination will also have to include an objection to the related penalty interest. I have already spoken about the consequences of the termination by Deutsche Bank. This will generally be unlawful towards the account holder and lead to Deutsche Bank being liable for damages. In that context, I consider the chance that Deutsche Bank will be successful with the collection of the penalty interest nil.
Penalty interest: object
It pays to pay close attention to this and to object. Consult an expert. Your lawyer can help you, but your accountant or a former banker, for example, can also assist you in checking the calculation of the (amount of the) penalty interest. My advice is to object to the calculation of penalty interest (which usually takes place automatically under the credit agreement) and to request a substantiation of the calculation in writing and to have it recalculated by an expert.
Entrepreneurs who have a long-term loan are ultimately confronted with the expiry of the fixed-rate period. The banks sometimes use this moment to (improperly) terminate the loan. What to do?
Loan term longer than fixed interest term
Those who finance real estate, among other things, often receive a loan from the bank with a term of thirty years. Agreed interest periods are usually set for five or ten years, with some exceptions. The loans are often granted interest-only.
Changed bank policy
Since the credit crisis, the policy of the banks has changed. Banks try to push for repayment after the end of the fixed-i
nterest period (if the loan is interest-only), but often such a high interest rate is offered for the new period that this is unaffordable / unacceptable. Or no new interest rate is offered at all and the entrepreneur is simply asked to repay the loan (read: to arrange for refinancing).
How can you respond to a request for repayment?
If you are confronted with the request for extra repayment or the request to repay in full or receive an offer for a new fixed-rate period that is not in line with the market, I recommend the following:
First of all, always object in writing and never say no.
In the case of a request for redemption, assess the request and if not appropriate make an appropriate counter-proposal.
Keep paying in the meantime. Refusing to pay off completely will work against you in legal proceedings. You then do not behave like a reasonably acting contracting party.
In the event that a full repayment is requested, you can object to this and point out that the loan has been taken out for a term of often many decades.
Make sure that the requests for refinancing are well documented.
Always pay the (previously) agreed interest
In the event that no or an unacceptable new interest rate proposal is made, you simply have to continue to pay the interest agreed up to that point and announce your willingness to do so to the bank in writing. Please note that under the General Banking Conditions, the bank has the right to set off assets against debts at any time. This means that if the bank imposes an unacceptably high repayment and (or) interest rate, the bank will simply deduct this from the account and in the event of a shortage of balance, it will try to offset this without further notice against any balances on other with the bank. bank accounts held. Make sure that these accounts are empty at that time, as this increases your negotiating position towards the bank.
And for everything, seek expert advice, the sooner the better.