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Know your rights when making payments in Europe.
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Key tips to protect yourself when choosing online or mobile banking services.
Throughout the loan term bank customers will amortise the principal of the loan and will pay interest on the amount owed.
As a rule, the instalments are paid monthly through the account debit on a date previously agreed with the bank.
For credit agreements concluded after 1 January 2021, institutions may not charge fees for processing instalments or any other fees for the same purpose.
Any change in the date or account through which the payment of the monthly instalment of the loan is processed implies the common agreement between the customer and the bank.
Customers amortise the loan in regular instalments of principal and interest and the capital repayment begins to be made as soon as the first instalment.
Over time, the amortisation of capital will be progressively higher and the amortisation of interest correspondingly lower.
The customer contracts with the credit institution an initial period during which there is no capital amortisation, only interest payment (grace period).
The instalment during this period is therefore lower than the instalment payable after the grace period, after which the repayment constitutes instalments of principal and interest (standard repayment modality).
The longer the grace period, the shorter the period the customer has to repay the principal and, thus, the greater the increase in the instalment in relation to the grace period.
In this modality, the total amount of interest payable will be higher than in the standard repayment modality.
Customers may delay repayment of part of the principal (usually between 10% and 30%) to the end of the loan term.
Instalments are constant over the life of the agreement and lower than in the standard repayment modality.
However, all deferred capital is paid in one instalment when the last instalment is paid.
Payment before the date originally planned to redeem the loan (early repayment) may correspond to a part of the outstanding capital (partial repayment) or to the total outstanding capital (full repayment).
Bank customers may, at any time, repay part of the capital outstanding in the amount they deem fit.
They must do so on the date that coincides with the payment of the instalment and advise the credit institution, at least seven business days in advance, that they will be making this repayment.
Upon receipt of the repayment request, the institution must promptly inform the bank customer, on paper or other durable medium, of the impact of the repayment of the loan for the customer, describing the assumptions used.
The partial early repayment will result in a reduction in the amount of the monthly instalments, since the amount of the outstanding capital of the loan has been reduced.
Alternatively, bank customers may prefer the partial early repayment to be used to reduce the term of the loan, in which case they must ask the bank to change the repayment term. This request constitutes a renegotiation of the agreement. The renegotiation of the terms of the agreement is only possible with an agreement between the bank customer and the credit institution.
Bank customers can repay all of the principal of the outstanding loan before the term stipulated in the agreement.
For this, they must notify the credit institution at least 10 business days in advance.
Upon receipt of the repayment request, the institution shall promptly inform the bank customer, on paper or other durable medium, of the impact of the repayment of the loan for the customer, describing the assumptions used.
In the event of early repayment of the loan in full, the institution must issue a statement for mortgage extinction free of charge within 14 business days of the date of termination of the agreement.
As a rule, full repayment occurs when the customer intends to transfer the loan to another credit institution.
In early repayment of the loan, the amount of the fee payable by the customer cannot be more than:
In agreements with a variable interest rate: the equivalent of 0.5% of the capital that is repaid;
In agreements with a fixed interest rate: the equivalent of 2% of the capital that is repaid.
The repayment fees refer to the maximum that can be charged and therefore do not apply if a lower fee has been agreed or even exempted.
Bank customers are exempt from paying this fee if the reason for which they intend to anticipate the repayment is one of the following: death, unemployment or professional travel of one of the holders of the loan.
In addition to the early repayment fee, the credit institution may only demand the payment of expenses that have been paid to conservatories, notary offices and the tax administration on behalf of the customer.
The institution may not demand the return of amounts that it decided to bear on the customer’s behalf when the credit agreement was entered into.
In the case of total early repayment, the interest due up to the date of the early repayment is added to the amount of the early repayment fee, calculated on the basis of the principal outstanding after the last instalment due and paid.
The institution may not charge interest in relation to the future, in particular for the period from the repayment date to the date on which the next instalment would become due under the contractual terms.
To transfer a loan from institution A to institution B, customers will have to repay the loan in full.
Institution A may require the payment of:
Early repayment fee, which cannot exceed 0.5% of the capital that is repaid (in the case of variable interest agreements) or 2% of the capital that is repaid (in the case of fixed interest rate agreements);
Expenses that it paid to conservatories, notary offices or tax administration on behalf of the customer;
Interest due up to the date of early repayment.
After requesting the transfer of the loan, institution A must provide institution B with all the information necessary for it to grant the new loan, such as the amount of the capital outstanding and the period of time of the initial loan agreement that has already elapsed.
In this case, the validity of the respective insurance agreements is not impaired where the conditions do not affect the risks covered by the insurance agreements concluded to guarantee the payment obligation under the agreement.
Decree-Law No. 74-A/2017 (only in Portuguese)