Can I Cancel a Loan Agreement?
There you are, you’ve decided on a major purchase, maybe a car, home improvements or repairs, the holiday of a lifetime, or a limited time offer or sale, and you’ve decided to finance the purchase, so you take out a loan.
You apply for and are approved for the loan you need. The deal is sealed.
Then for some reason, be it “buyer’s remorse”, or you find a better deal, a better loan rate or better loans terms, you want to cancel the first loan agreement.
Can you cancel a loan agreement, and if so, how do you do this?
There are some factors and time-frames that are involved in cancelling a loan agreement, but the fact is that loan agreements can be cancelled. However, you will need to be aware of the conditions to do this.
All loans and agreements have terms and conditions, and in most instances there are certain aspects of the loan that needs to be explained to us, prior to entering into the agreement. However, with all the traffic on the Internet, as consumers making purchases, and also banking and taking out loans, there can be times when we may miss an aspect of the terms and conditions, and change our mind about the loan.
The loan we have already agreed to.
Cooling Off Period
Here in the UK we have what is termed a “cooling off period” when we enter into a contract for services with a company.
This cooling off period is usually 14 days from the date you agree to enter into the contract for the service.
During this cooling off period of 14 days, you can contact the provider, usually best in some form of writing/email, and they will refund your money, or not begin drafting payments for the service.
The 14 day cooling off period does not pertain to the following services:
* Hotels (short-term stays)
* Courier services or other transporting of goods
* Car hire
But what about a loan agreement, does this cooling off period apply?
Yes, the same 14 day cooling off period applies, but with some slight variations.
And this includes loans or credit cards you may have taken out online, via the phone, but may not include taking out a loan in person. Meaning if you walk into a bank, request a loan and are approved, you may not have the same rights as you would if you took out a loan online.
However, you still have a cooling off period even if you walk into a lender’s premise and take out a loan, but that cooling off period os less, just five (5) days.
So you can still cancel the loan agreement.
One other area that the cooling off period does NOT cover, are loans over £60,260. So mortgages would not be covered under the 14 day cooling off period.
So what happens after the cooling off period if you wish to cancel a loan agreement?
In some instances you can just give the money back, paying the loan in full. If there were to be any interest that has accrued during the time you had the money, you could and probably would be held responsible to pay this.
Consider it the price you pay for changing your mind.
Of course if a loan has been mis-sold or something about the loan misrepresented, you do have recourse via the FOS/Financial Ombudsman Service.
HP/Hire Purchase Agreements
Hire Purchase agreements for cars, or other items, are covered under the same 14 day cooling off period, but also have some unique cancellation aspects to them.
If you have paid half or more of the payments set out in an HP agreement, you can return the item, be it a car, or other item you have purchased.
Some examples may be this:
You have bought a 3 piece suite under an HP agreement and the term of the agreement is 24 months. After 12 months you no longer can afford the payments, since you have paid half the agreed payments, you can return the suite, and are no longer obligated to make any future payments.
In the same example, you have a HP contract for 24 months, but after 6 months feel you can no longer afford the payments.
You will need to pay 6 payments to bring the total to 12 payments, which is half the agreed payments, in order to return the item.
If the payments are £25 a month, you would need to pay £150 in order to return the item.
As we can see, there are ways to cancel or get out of a loan agreement if we need to, however, it is always best to be 100% sure prior to entering into the agreement.