By Theanos Thiopoulou
The customer of a bank is entitled to a study, second thoughts, change of opinion and withdrawal from signing a loan, who has a grace period, as the case may be, before finally deciding to take the credit facility (loan). When concluding consumer credit agreements (consumer loans), there are EU rules on consumer protection in place before the contract is signed, which ensure the possibility of withdrawal. There are also rights that the customer must know and above all to have full information from the bank.
According to the data presented by “F” from the website of the European Commission, if someone decides to buy a new product on credit (loan), it is better to compare offers before deciding. Before signing any credit agreement, the bank must provide the customer with a standard document, the so-called standard European consumer credit information form. The purpose of this form is to inform you as fully as possible about the terms and conditions of any credit agreement that the customer intends to sign.
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The form (must) include: the main features of the contract, the amount of credit and its cost, the annual rate of charge (represents the total cost of credit, including interest, commission, taxes and any other fees), the number, frequency and size of all payments, important legal aspects.
This way, the prospect can compare offers from different credit providers and choose the one that works best for them. If the potential customer has not received the form from the bank, he can request it.
Withdrawal from a credit agreement
If the prospective client changes his mind about the consumer credit agreement he signed or realizes that he does not need it, he can withdraw from the agreement within 14 calendar days from its signing (a similar possibility for mortgages lasts 7 days). He is not obliged to give any explanation to the lender, but will have to repay the money borrowed plus interest and any non-repayable expenses already paid by the lender.
Repay the loan earlier
If the borrower wishes to repay the loan earlier than the date stated in the contract, he has the right to do so. It must be borne in mind, however, that he is obliged to compensate the bank for the income he will be deprived of. This compensation payment, however, should not exceed the total amount of interest lost.
These rules apply to consumer credit from € 200 to € 75,000, excluding loans that:
Ίζονται secured by a mortgage
● concluded for the purchase of land or real estate
Ρούν relate to lease agreements or lease agreements when there is no purchase obligation
Either it is interest free and without other charges, or in the form of an overdraft option, which must be repaid within 1 month
Τουν arise from a court decision
● are related to loans which are granted to a limited number of individuals.
Mortgages
A mortgage loan allows you to buy a home. Mortgages are granted by banks or other creditors and are usually secured by mortgaging the property. Mortgages are usually granted at a lower interest rate and with a longer repayment period, compared to consumer loans. However, if the borrower is unable to meet the loan repayment obligations and has mortgaged a property, creditors can seize it and resell it to repay the loan.
Banks are free to approve or reject the mortgage application. Before the bank grants the mortgage, it needs to assess the creditworthiness, ie whether the customer can cover the cost of the loan.
The customer decides
In order for the client to decide on a mortgage, it is advisable to compare offers from different creditors. Along with its binding offer, the bank must also provide you with the European Standard Information Sheet (ESIS), which has been set up to provide the best possible information on the terms and conditions of the mortgage offered.
ESIS provides the following information:
Or the loan amount
● the duration of the loan
Or the type of interest rate
● the total amount to be repaid
● the total annual charge rate (APR): a single amount that represents the total cost of the loan expressed as an annual rate. SEPE helps you compare different offers
● any costs to be paid by the borrower on a regular or lump sum basis
● the number, frequency and size of doses
● information on the terms of early repayment and the amount you will be charged if you decide to repay the loan earlier than the due date
● in the case of a foreign currency loan: examples illustrating the potential impact of exchange rate fluctuations on mortgages
ESIS also allows the prospective customer to compare offers from different banks and choose the one that suits them best. If the applicant has not received the ESIS form from the creditor, he / she can request it.
Seven days of study
The client has at least 7 days to consider an offer or withdraw from the loan agreement. According to EU rules, the creditor or credit intermediary must give the borrower at least 7 days to evaluate the offer. However, the national legislation of some EU countries may give more time.
Depending on the country in which the customer applies for the loan, this deadline can be:
– the examination period, during which the client examines whether the loan suits him
– the period during which he can withdraw from the loan agreement he has already signed
– or a combination of both.
Early repayment of the mortgage loan
The customer can usually repay part or all of the debt earlier than the repayment period. This way, he will stop paying interest on the outstanding balance of the loan or choose a more favorable mortgage offer, possibly from a different lender. National rules determine, in this case, whether the creditor can ask the borrower to pay compensation if he repays the mortgage earlier than expected. Depending on the case, this compensation should not exceed the financial loss of the creditor, ie the bank.
Loan insurance where the customer wants
Mortgage insurance is very important when there are reasons that prevent the debt from being repaid, for example in case of death, illness or job loss. Creditors can claim to secure a mortgage. They can offer an insurance contract in the same package as the mortgage loan contract, but this is not a condition for the loan. The client always has the right to seek better terms from other insurance companies, as long as the level of guarantees they offer is equivalent to what the creditor requires. Credit institutions can, however, oblige the borrower to open payment or savings accounts in them, through which the loan will be repaid.
Credit rating
Before the bank agrees to grant a loan, the bank must assess its creditworthiness. The assessment is based on various criteria, such as: the financial situation of the client (assets, debts, etc.) and the value of the property that has been mortgaged as collateral for the loan.
Therefore, the customer will be required to declare their income so that the creditor can check the ability to repay the loan. The bank can only grant a loan if the assessment shows that the borrower can repay the loan. Creditors often refuse to provide mortgages on real estate located in another country. They also refuse to lend to people who live or have income in a country other than the one in which they are based. However, they are not allowed to discriminate between EU citizens solely on the basis of nationality.
Discrimination due to the nationality of the client
If the prospect considers that he or she has been disadvantaged by a bank because of his or her nationality, he or she may:
– contact the bank (the “grievance service”) to obtain a formal written statement of the reasons for this refusal,
– if the rejection is based solely on nationality, seek advice and assistance from FIN-NET (Financial Dispute Resolution Network), which mediates cross-border disputes between consumers and financial institutions, such as banks.
