Termination – what to do when the bank terminates the loan agreement

It is probably the nightmare of any borrower: during the repayment phase, the bank terminates the loan . Apart from the fact that such termination is noted as a negative feature in the private credit act of the consumer and the creditworthiness of the consumer deteriorates, the Bank has a further significant consequence of the loan termination : The entire outstanding debt has to plus any default interest and a compensation payment immediately the bank be transferred.

After the loan termination, the outstanding debt must be settled quickly

As a rule, the financial institutions give their former clients two weeks to do so – but even this deadline quickly becomes a problem with larger loan amounts. All these events and the termination of the credit agreement by the bank can come as no surprise to the customer – before the dissolution of the contract, a lot must happen. In contrast to the borrower , the bank can not simply terminate the loan agreement in this way – it must make use of its so-called extraordinary termination right.

That must happen before the loan termination

In order to terminate the loan agreement, the bank must provide an important reason for the termination of the contract – for example, that the customer does not pay the due loan installments or that their financial circumstances change significantly. If these cases occur because the customer, for example, no longer pays his repayment installments, the bank must observe a certain reminder period before the termination. As a rule, the bank issues a reminder of the non-payment of installments for three months until the actual termination of the credit agreement.

If the terminated borrower is unable to repay the entire outstanding loan amount to the bank within the specified time, the bank will hand over the claim to a bankruptcy trustee. In addition, insolvency proceedings are initiated against the consumer in most cases at the same time.