Loan: costs reimbursed in the event of early repayment

The costs incurred for the unused financing period must be reimbursed. The Parliament complies with the principle sanctioned by the Court of Justice of the EU with the “Lexitor” ruling, aimed at supporting the reasons of the consumer who paid off his loan in advance.

The lender who decides to pay off the debt before the due date has the right to reimbursement of the costs incurred for the unused loan period. This is the principle of the EU Court of Justice with the “Lexitor” ruling.

What costs for early repayment of the loan?

The early repayment of the loan provides for the repayment of the residual capital before the natural expiry of the contract. It may happen, for example, that the customer has taken out a loan or a loan upon assignment of the fifth, but then finds himself in the condition (for example because he has collected unforeseen sums) to pay off the debt by paying the residual capital and interest to the lender accrued up to that point.

In these cases, contracts usually provide for the obligation to pay a penalty equal to:

  • 1% of the amount repaid in advance if the residual term of the contract is more than one year ;
  • 0.5% of the amount repaid in advance if the remaining term of the contract is equal to or less than one year.

On the other hand, the indemnity is not due if :

  • the amount repaid in advance corresponds to the entire residual debt;
  • the amount repaid in advance is equal to or less than 10 thousand euros or if the reimbursement was made in execution of a contract with insurance guaranteeing the credit;
  • in the event of a credit agreement;
  • if the early repayment takes place in a period in which an interest rate expressed by a specific fixed percentage predetermined in the contract does not apply.

New rules on the costs to be reimbursed

The ruling of the European Court of Justice, dating back to 2019, established the consumer’s right to reimburse all costs against him for the period in which he did not benefit from the loan in the event of early repayment, but so far the ruling had not had a concrete follow-up due to differences in interpretation.

During the conversion of the Sostegni Bis Decree, the Chamber approved an amendment that puts on paper the provisions of the ruling and clarifies that the right to repayment does not apply only to recurring costs, i.e. those related to the duration of the loan agreement, but also that upfront, ie independent of the duration, which according to the legislation currently in force were not reimbursed. To give some examples, this area includes preliminary investigation, appraisal, and brokerage costs.

Effects on lenders

If, as seems certain, the Senate definitively approves this legislative change, banks and financial institutions will no longer be able to refuse to repay these sums. But there are also advantages for the financiers, given that the regulatory clarification will avoid the numerous disputes that have so far flooded the courts and left the question of the justice of interests unanswered.

This change will also have an impact on credit brokers (the professionals who put banks / financial companies and consumers in contact), since the regulatory provision establishes the right of recourse by the credit institution towards them for the reimbursed and relative portion to the remuneration for the intermediation activity: on this point, the approved text does not establish an automatism but entrusts the matter to the free agreement between the parties.

Extinguish the loan or not?

Returning to the consumers’ point of view, before deciding whether to opt for early repayment, it is advisable to calculate the amount that will have to be repaid, starting from what is reported in the prospectus relating to the financing situation. The document shows the amount of the residual principal and interest that have yet to be paid.

The convenience will be greater the more you are in the initial phase of financing and there are still many interests to be paid. In the opposite case, the game may not be worth the candle.