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.