People often lose their heads after receiving a positive decision on a loan application and strive to finish the loan transaction as quickly as possible by signing an agreement in order to get the desired amount of money or a specific product. As a result, the loan agreement is signed without careful study and after some time the borrower is faced with the fact that the payment terms have been changed.
The changed loan conditions surprise the borrower, he does not understand how the banking organization managed to make a change to the loan agreement already signed by the client. There are some situations when such actions of a financial organization are legal and nothing can be done about them.
When can the bank change the agreement?
Changes to the loan agreement can be made directly to the main loan agreement, and it is also possible for a financial organization to draw up a separate document; an additional agreement, where all the accepted changes are registered. The reason for a unilateral change in the terms of a loan agreement can be various reasons, for example, sudden changes in the commercial loan market, the application of amendments to current legislation, changes in the Central Bank’s refinancing rate, and so on. In most cases, such changes lead to an increase in the annual interest rate.
There may be situations when the lender decides to change the loan terms independently. There are several reasons for making this decision. On legal grounds, a banking institution has the right to shorten the loan repayment period in cases when the collateral was damaged or sold without the consent of a financial organization, the borrower is constantly late with mandatory loan payments or refuses to repay its loan debt at all.
Some financial organizations may reduce credit terms and demand early repayment of the loan debt if they learn about a decrease in the customer’s solvency. The borrower can challenge this decision if the decrease insolvency did not affect the payment of the loan debt in any way. According to the law, the bank can demand to pay the loan before the deadline only if the borrower systematically allows delays.
Features of interest rate changes
In most cases, borrowers are faced with changing the loan agreement unilaterally by the lender in the direction of increasing the interest rate. When making such changes to the terms of the loan agreement, the financial institution undertakes to notify its credit client of these changes. It should be noted that for such changes, the financial organization must have a good reason.
The new interest rate must necessarily be reasonable and correspond to the changes that occurred, in connection with which the banking institution had to take such actions. If the interest rate rises very much, the borrower can go to court to challenge the actions of their lender.