Early loan repayment: the bank must give you back part of the fee
Repaid a cash loan early? The bank is required to give you back a proportional part of all the costs - including the arrangement fee you paid upfront, right at the start. Most people do not know this, and banks rarely remind them.
Where this right comes from
For years banks applied a simple interpretation: on early repayment we give back the interest for the unused period - because it simply will not accrue - but we do not give back the fee, because it was a one-off charge "for granting the loan". Collected on the day of payout, earned once and for all.
On 11 September 2019 the Court of Justice of the European Union (CJEU) gave judgment in case C-383/18, known as the Lexitor judgment. The Court ruled that on early repayment of a consumer loan, all costs imposed on the consumer are subject to reduction - regardless of whether they depend on the duration of the agreement, and regardless of when they were charged.
In Polish law this principle is set out in Art. 49(1) of the Consumer Credit Act: if the whole loan is repaid early, the total cost of the loan is reduced by the costs relating to the period by which the agreement was shortened - even if the consumer incurred them before that repayment. That last part of the sentence is the most important one here.
The arrangement fee, processing fee, administration fee, the cost of insurance linked to the loan - all of it is subject to a proportional refund if you repay the loan early. Not just the interest.
The only thing the bank does not refund is costs paid to third parties that the bank did not actually keep - in practice, most often notary fees and taxes. A bank arrangement fee does not belong in that category.
How the refund is calculated: the proportional method
All the maths fits in one line. You take the fee you paid and multiply it by the share of the original loan term that will no longer happen:
N - the number of instalments in the agreement (the whole original term)
k - the number of instalments actually paid up to the repayment date
The same method applies to any other one-off charge: processing fee, administration fee, application fee.
In practice: a PLN 50,000 loan repaid after two years
Let's take a typical cash loan. PLN 50,000 over 60 months, nominal interest 12%, arrangement fee PLN 5,000 (i.e. 10% of the amount - nothing unusual in this industry). The fixed instalment is PLN 1,112.22, and if you repaid the loan to the end, the interest would come to PLN 16,733.34. With the fee, that gives a total cost of PLN 21,733.34 and an APR (RRSO) of 18.09% - with "12" in the advert.
After 24 instalments you get a bonus and decide to close the matter. The balance left to repay is PLN 33,486.24. And this is where the part the bank will not tell you begins:
The bank gives this back to you
The agreement was for 60 months, you repaid after 24. You shortened it by 36 months, i.e. by 60% of the term. That is exactly the share of the fee you can claim: PLN 5,000 × 36/60.
This will never be charged
Over 24 instalments you paid PLN 10,179.56 of interest. If you had repaid to the end, you would have paid PLN 16,733.34. The difference simply disappears from your life.
PLN 3,000.00 of fee refunded plus PLN 6,553.78 of interest you will not pay. The sums for closing the loan look like this: you pay off the balance of PLN 33,486.24, the bank can add compensation of at most PLN 334.86 (more on that in a moment), and gives you back PLN 3,000.00 of the fee. Net, PLN 30,821.10 leaves your pocket.
And now note this: the bank will only give back the PLN 3,000 fee if you claim it. The interest disappears by itself, because that is how the schedule works. The fee does not.
Table: how much you get back when repaying at different times
The same loan - PLN 50,000, 12%, 60 instalments, PLN 5,000 fee - repaid at four different points. All the numbers were worked out with the same engine that powers our calculators:
| Repaid after | Balance to repay | Fee refund | Interest saved | Total benefit |
|---|---|---|---|---|
| 12 months | PLN 42,235.49 | PLN 4,000.00 | PLN 11,151.18 | PLN 15,151.18 |
| 24 months | PLN 33,486.24 | PLN 3,000.00 | PLN 6,553.78 | PLN 9,553.78 |
| 36 months | PLN 23,627.37 | PLN 2,000.00 | PLN 3,065.97 | PLN 5,065.97 |
| 48 months | PLN 12,518.15 | PLN 1,000.00 | PLN 828.52 | PLN 1,828.52 |
Look at the proportions. When you repay after a year, the fee refund (PLN 4,000) is more than a quarter of the whole benefit. When you repay after four years, the interest saved shrinks to PLN 828.52 - and then the fee is the bigger part of the refund. The further into the loan you are, the more the recovered fee stops being an extra and becomes the main amount worth fighting for.
The reason is simple: fixed instalments pay off interest "front-loaded". In the first years most of your instalment goes on interest, so the interest saving from early repayment is huge. The fee, on the other hand, is refunded linearly, simply in proportion to time - which is why towards the end of the loan it is the only real refund left. More on this mechanism in "Fixed or declining instalments?".
What this applies to and what it does not
Consumer loans
Cash loans, instalment loans, personal loans, credit cards, overdrafts, payday loans - everything up to PLN 255,550. Here Art. 49 of the Consumer Credit Act and the Lexitor judgment apply, no "buts".
Mortgages
These are governed by the Mortgage Credit Act. Early repayment reduces costs here too, but the bank is entitled to compensation - with a fixed rate up to 3% of the amount repaid, with a variable rate only during the first 3 years and no more than the cost the bank actually incurred.
The PLN 255,550 limit is written directly into the Consumer Credit Act. Above it - or when the loan is secured by a mortgage - other rules apply. In practice: every typical cash loan, every in-store instalment purchase and every payday loan falls under the consumer regime.
Compensation for the bank: how much it can deduct
The bank is not left with nothing at all. With a fixed-rate consumer loan, it can charge compensation for early repayment, but the law puts three hard limits on it at once - and the lowest of them applies:
| Limit | Maximum | When it applies |
|---|---|---|
| More than a year left until the end of the agreement | 1% of the amount repaid | always, when the rate is fixed |
| A year or less left until the end of the agreement | 0.5% of the amount repaid | always, when the rate is fixed |
| Overriding cap | no more than the interest until the end of the agreement | always - it trims both of the above |
| Loan with a variable interest rate | PLN 0 | no compensation at all |
In our example, when repaying after 24 instalments the balance is PLN 33,486.24, so 1% is PLN 334.86. Against PLN 9,553.78 of benefit, that is noise. When repaying after 48 instalments only a year is left, so the limit falls to 0.5% of PLN 12,518.15, i.e. PLN 62.59.
The worst possible scenario in our table - repaying after 12 months - means compensation of at most PLN 422.35 against a benefit of PLN 15,151.18. A ratio of 1 to 36. There is no situation in which compensation on its own makes early repayment not worth it, because the law does not allow it to exceed the interest you would have paid anyway.
How to claim it - step by step
Application to the bank
In writing or through online banking. Give the agreement number, repayment date, fee amount, the original and actual number of instalments and the refund amount you calculated. Refer to Art. 49 of the Consumer Credit Act and the CJEU judgment C-383/18. Request a transfer to the account you specify.
Complaint
The bank has 30 days to respond to a complaint (up to 60 in particularly complex cases, but it must tell you in advance). No response within the deadline means, by law, that the complaint has been accepted as you requested. The refund itself should follow without delay - usually within 14 days of acceptance.
Financial Ombudsman
Refused? Apply to the Financial Ombudsman (Rzecznik Finansowy) - the intervention procedure is free for consumers. Only after that, court. With amounts of a few thousand zloty, cases like this usually end at the complaint or Ombudsman stage, because the case law is unambiguous.
This is the most important sentence in this article. The interest "gives itself back", because it disappears from the schedule. But a fee refund requires your application. Some banks pay it only after a complaint, some offer a lower amount than is due - so work out yourself how much you are owed before you accept anything.
All you need to check it: the loan agreement (fee amount and number of instalments) and the repayment confirmation (date). The rest is one multiplication.
A claim for a refund of the proportional part of the costs becomes time-barred 6 years after the date of early repayment (for claims that arose before 9 July 2018, the previous 10-year period applied). After that, the bank can simply refuse - and it will be right.
So go through all cash and instalment loans you repaid early in the last six years. Including those you paid off with a consolidation loan - that is early repayment too. With several such loans, the total can add up to an amount that makes a difference to your household budget.
Three things to remember
1. All costs are refundable, not just interest. The arrangement fee, processing fee, insurance linked to the loan - all in proportion to the shortened term. This is not a matter of the bank's goodwill, but of Art. 49 of the Act and CJEU judgment C-383/18.
2. The formula is one line. Refund = fee × (N - k) / N. You can work it out on paper in a minute and you will know whether the bank's offer is fair.
3. You have to claim it - and you have 6 years to do so. The bank will not ring you up offering to give you PLN 3,000. Application, then complaint, then the Financial Ombudsman.
Work it out yourself
Overpayment and early repayment calculator
Enter the loan amount, interest rate and term, and you will see the schedule, the balance in each month and the interest you will not pay by repaying early. Add the proportional fee refund from the formula in this article to that result - and you have the full amount worth claiming.
Calculate early repaymentAPR calculator
Check what a loan with a fee really costs. In our example "12%" is in reality an APR of 18.09%.
Calculate the APRLoan repayment calculator
See how much interest you have paid so far and how much would be left until the end - i.e. the real scale of the saving from repaying early.
See the scheduleRead on
- Overpay your loan or invest? - since early repayment gives a guaranteed, tax-free return, let's check when it beats every investment.
- Fixed or declining instalments? - why with fixed instalments early repayment cuts out so much interest: because in the first years that is mostly what you pay.
- APR or interest rate? - the fee is the part of the cost that is easiest to overlook when you sign the agreement. And the easiest to get back when you close it.
The calculations were made with the js/finance.js engine, assuming: a
PLN 50,000 loan, a fixed nominal interest rate of 12%, fixed instalments, 60
instalments, a PLN 5,000 fee deducted from the payout. Balance and interest are
calculated at the end of the given instalment, without interest for the days between
the last instalment and the actual repayment date. The fee refund is calculated with
the linear method (proportional to time) - some banks use other methods, which can be
a matter of dispute; the linear method is the one most often accepted by the Financial
Ombudsman and UOKiK (Poland's Office of Competition and Consumer Protection). This text
is educational and does not constitute legal advice.