Early Repayment of Consumer Loans

Russian law, speaking generally, does not permit a borrower to pay a term loan early. A loan agreement may give such right ‘without premium or penalty’ yet as a rule early repayment needs a creditor’s consent. Banks do not like prepayments because if there are no credit problems they cut short the life of an attractive asset. Quite often, therefore, a loan agreement requires an additional premium to a bank in the event of prepayment.

The Russian Parliament has adopted a law allowing borrowers to return a loan early without creditor’s consent. The law amends articles 809 and 810 of Russia’s Civil Code.

Now individuals have the right to repay consumer loans ahead of time regardless of the lender’s consent. A borrower just needs to give the lender a 30 days notice to terminate the loan agreement. There is no penalty or premium. Interest is payable until the day of loan repayment.

The law operates retrospectively and applies to contracts already in force. The law does not apply to business loans.