The offer of today’s loan companies increasingly includes various types of additional options. The task of such options is to adjust the structure of loan products to the needs and preferences of customers. One of such solutions is to extend the loan repayment date. Some companies offer the option of extending the duration of the contract by a specific additional period.
However, it is worth realizing that the option to extend the loan is a solution with its own specificity, which is certainly worth knowing.
What is the loan repayment deadline?
As the name implies, extending the loan repayment period simply means extending the duration of the loan agreement . As a general rule, the maximum available contract renewal period will be equivalent to the duration of the basic contract. This means that if the underlying contract specifies a repayment period of 30 days. We will probably be able to extend the loan for a maximum of another 30 days.
Of course, this is not an iron rule, because loan institutions sometimes have a more flexible policy in this regard.
You should also be aware of four important issues, namely
- The option to extend the loan is not the borrower’s right. This is an additional option that the loan institution may include in its offer, but it is not its obligation under the law. This means that we will usually be able to apply for the extension of the loan agreement only if the lender provides such a possibility.
- Extending the loan comes at an additional cost. To extend the duration of the loan, we will have to pay a one-time commission, which is the extension fee. In the vast majority of cases, the amount of commission will depend on the extension period. The longer the “additional” duration of the loan, the higher the amount of commission for the extension.
- We can apply for an extension only before the basic loan repayment date. If the deadline for paying for our loans is, for example, November 20, we can only apply for a loan extension before that date. However, this is not all. It is worth reading the regulations, information brochures and documents of the framework loan agreement carefully. Sometimes the lender reserves that the loan extension application may be submitted by the customer e.g. at least 7 days before the end of the basic repayment period.
- The loan company does not have to accept the loan extension application. As already mentioned, the extension of the loan repayment date is not the customer’s right, but an additional option provided by the loan institution. It also has the effect that the lender may refuse to extend the contract even if such an option is available in the company’s offer.
You should also be aware of the fact that the commission for extending a loan is not included in the APRC . This means that we will also have to pay the loan extension option for promotional loans with an APRC of 0%. However, what is also important, using the option to extend the loan does not change the other terms of the commitment. The only additional fee that we will have to pay will be the commission for extending the contract, if of course we repay the loan on time .
Extending the loan repayment period and refinancing the loan
In common opinion, extending the loan repayment period is very often associated with refinancing. However, the reality is different. If the loan agreement is extended, we simply receive additional time from the lender to repay the commitment. However, refinancing involves a new loan, i.e. a so-called refinancing loan.
The refinancing loan is usually not granted by the lender itself, but by the entity cooperating with it. For the borrower, this means that the terms of the refinancing loan may differ significantly from the terms of the existing commitment.