Loan termination by the bank – what to do if the credit or loan has been terminated?

A loan cancellation by the bank is only legal under certain circumstances. If you are having difficulty servicing your installments, be sure to check with your bank. If the notice of termination is actually given, there are ways to defend yourself.

Can the bank cancel my construction financing??

It happens again and again that borrowers receive mail in which a loan termination is threatened by the bank. You should never ignore such information, because in some cases a bank is actually allowed to cancel a loan. However, this cannot be done arbitrarily; a number of conditions must be met in accordance with § 498 of the german civil code (BGB) before a consumer loan agreement can be terminated by the bank. Thus, the borrower must be in default, in whole or in part, on at least two consecutive installments. This is why it is important to talk to the bank immediately if you are having financial difficulties. In addition, for a real estate consumer loan agreement such as a construction loan, he must be in default on at least 2.5 percent of the principal amount of the loan. In the case of general consumer loan agreements, this value is at least 5% for a contractual term of more than three years, or. With a value of at least 10% for a contract term of less than three years. In addition, the bank cannot terminate the loan from one day to the next. It must give the borrower a two-week deadline to pay the amount in arrears and indicate that if payment is not made within this period, the entire remaining debt will be reclaimed. In addition, the bank must offer the customer a meeting at the latest when this deadline is set, in order to perhaps find a solution together in this way.

So no borrower has to be afraid of a sudden and arbitrary cancellation by the bank. But you should not close your eyes to a possible cancellation of the construction financing in case of financial difficulties either. Because if a notice of termination has been issued, it is often difficult for affected customers to find a new loan for a debt restructuring. Cancellation results in a negative SCHUFA entry – a no-go for many banks. In order to avoid foreclosure or private insolvency, it is possible in some cases to reach a settlement with the bank. If you are able to pay at least a large part of the remaining debt, the bank may be content with this. You may also be able to agree with the bank to pay the remaining debt in installments. Many loan agreements grant banks the right to seize your wages in the event of default. If this threatens, it is best to speak directly to your employer so that the bank does not take you by surprise.

Under these circumstances, the bank can cancel the loan:

  • You are in arrears with at least two consecutive installments in whole or in part
  • In case of a real estate loan you are in default with at least 2.5% of the nominal amount of the loan
  • The bank gives you two weeks to pay the outstanding amount
  • The bank will offer you a meeting to find a possible solution at the latest when you are given the deadline

How to prevent the bank from terminating the loan

However, the most important thing is: as soon as you notice that you have difficulties to continue paying the installments, you have to contact your bank in order to find a solution together. Because the financial bottleneck is often only a phase, for example due to temporary unemployment or illness. In these cases, many banks allow you to suspend payment of the installments for a few months or at least reduce the installment significantly.

Another way to avoid termination by the bank is to revoke the real estate loan. The legislator allows the consumer a perpetual right of revocation if the loan agreement contains incorrect information or mandatory information is missing altogether. We will be happy to check your contract for such errors free of charge and inform you whether you can also use the so-called revocation joker. In principle, the revocation joker comes into question for real estate loan agreements that were concluded after the 10th anniversary of the loan agreement.06.2010, as well as in the case of consumer loan agreements without land register debt security that were concluded after 01 january 2010.11.Concluded in 2002.

If the cancellation is successful, you can withdraw from the contract without having to pay an early repayment penalty. This gives you the option of rescheduling the debt to a loan with more favorable interest rates, from which many consumers are currently benefiting.

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Unlawful termination of the loan by the bank

Under the above-mentioned conditions, banks are allowed to terminate consumer loan agreements extraordinarily. However, it is not possible to terminate a contract with a fixed term. In the case of contracts with an indefinite term, a notice period of at least two months must be observed in the case of ordinary termination.

It is also important to know that the burden of proof lies with the bank. The bank must therefore prove that the above-mentioned conditions have been met and that it therefore has the right to terminate the loan agreement.

If you think the termination is unjustified, we are currently offering you a free initial evaluation of its legality. Courts have already ruled in favor of a customer that the bank's letter threatening termination was not worded precisely enough. In this notice, the borrower must be made aware of what will happen in the event of non-payment – namely, immediate repayment of the entire remaining debt (the amount must also be stated).

It can also happen that the bank or savings bank makes a demand in this letter that is far too high and far in excess of the remaining debt – for example, by demanding inadmissible reminder fees. In such a case, too, a court ruled that the loan termination was invalid.

By the way: the bank is not allowed to demand an early repayment penalty if the termination was made by you. However, if you as a customer want to terminate the loan prematurely, you must expect to have to pay this compensation.

In the event of a non-legal termination, the contract continues to run as normal. In addition, the customer is entitled to damages.

If your real estate loan has been terminated by the bank, we offer you our assistance. We check both the termination and your credit agreement. In many cases, our free legal audits have revealed that the termination was not lawful. If you are threatened with foreclosure of your property or private insolvency, seek advice from experienced specialist lawyers in the field of banking and capital market law. HAHN attorneys at law – on the side of the consumer for more than 30 years!

FAQ on termination by the bank

If the termination is on the part of the bank, the bank may not demand an early repayment penalty from you. If, on the other hand, they want to terminate, they must pay this compensation to the bank.

If you have difficulties in servicing the installments, you should not hide this fact, but talk to your bank about it immediately. Together we can often find a solution. With many banks, it is possible to suspend or at least reduce the installment payment for a short period of time.

Contracts with a fixed term cannot be terminated without notice. The situation is different for contracts with an indefinite term. These can be terminated properly, but a notice period of two months must be observed.

Banks may only terminate a loan agreement extraordinarily under very specific conditions.

The borrower must be in arrears with at least two consecutive installments. If it is a real estate loan, this default amount must be at least 2.5% of the nominal amount of the loan. In addition, the bank must give the borrower a two-week grace period to pay the outstanding balance. And at the latest when this deadline is given, the company must offer a meeting to find a solution together.

In principle, it is worthwhile to have your loan agreement checked by an experienced specialist lawyer, because in many cases it is possible to use the so-called revocation joker. In the event of incorrect contractual information or missing mandatory information, revocation is still possible even years after conclusion of the contract. This is how you can get out of the loan agreement without having to pay an early repayment penalty.