Consumer credits and loans
When taking out consumer credit, remember there are EU rules in place to protect you before you sign the contract and to guarantee you a way out, should you need it.
Key information so you can compare offers
If you decide to buy a new product on credit, it's best to compare offers before taking any decisions. Before you sign any credit contract, the credit provider has to give you a standard document called the Standard European Consumer Credit Information form. This is designed to give you the best possible overview of the terms and conditions of any credit contract you consider. It includes:
- the main features of the contract
- the amount of credit and its cost
- the Annual Percentage Rate (APR - a single figure representing the total cost of the credit, including interest, commission, taxes and any other kinds of fees)
- the number, frequency and size of all your payments
- a note on important legal aspects
This allows you to compare offers from different credit providers and select the one that suits you best. If you haven't received this form from your credit provider, you can request it.
Withdrawing from a credit contract
If you're having second thoughts about the credit agreement you've signed or realise that you don't need credit after all, you can withdraw from the agreement within 14 calendar days of signing it. You don't have to give the credit provider any explanation, but you'll have to refund the money you borrowed, plus interest and any non-refundable charges already paid by the credit provider.
Paolo, from Italy, took out a EUR 1 000 loan from a non-bank lender to buy a new washing machine. Before signing the contract, he was given very little information about the credit, and he didn't receive the standard pre-contract information sheet (the Standard European Consumer Credit Information form). He was told he was to repay the loan within 2 years, at a moderate rate of interest.
After signing the contract, he realised that the Annual Percentage Rate of charge (the total cost of the credit) would be very high. He then decided not to take out this loan after all, but to find a better alternative. On contacting the local consumer organisation, he learned that he could withdraw from the contract within 14 days simply by writing a letter to the creditor and repaying the money he had already received.
Paying off your loan early
If you want to pay off your credit earlier than stated in your contract, you have the right to do so. Be aware that you may have to compensate the credit provider for the income they have forfeited. This compensatory payment, however, must not exceed the total amount of interest actually forgone.
These rules apply to consumer credit between EUR 200 and EUR 75 000, with the exception of loans:
- secured by a mortgage
- concluded for the purchase of land or real estate
- for lease or rental agreements where there is no obligation to purchase
- granted free of interest, without other charges, or in the form of an overdraft facility to be repaid within 1 month
- resulting from a judicial ruling
- linked to loans granted to a restricted group from within the general public
Taking out a credit or a loan in another EU country
If you want to take out a credit or a loan in another EU country, be aware that banks may be reluctant to lend to residents of countries other than the one the bank is based in or even to lend to residents of the same country working in another EU country.
Banks are free to set these kinds of limits to their lending. However, under the general principle of non-discrimination on grounds of nationality, they are not allowed to discriminate between EU citizens on the basis of nationality.
If you think a bank has discriminated against you, you may wish to:
- contact the bank (its complaints office) to obtain a written reply stating the exact reasons for refusing you credit
- based on the written answer from the bank, ask for advice and help from FIN-NET (the Financial Dispute Resolution Network), which mediates in financial conflicts between consumers and providers of financial services, such as banks