Yes, you can cancel a loan agreement. The power to cancel a loan agreement belongs to the borrower. If the borrower wants to cancel a loan agreement, he has the right to do so.
When it comes to getting out of debt, one must be careful. Debt and defaults tend to snowball and create very difficult situations.
What is the difference between debt and default?
Well, the borrower could be carrying too much debt and not have a sufficient amount of cash in hand. This could be caused by an unexpected illness or accident, or it could be caused by poor planning.
If you did not plan for the unexpected illness or accident, your income could be too low to pay the loans in full. That will mean a large amount of interest added onto the original loan amount.
The same situation could happen with a sudden illness or accident. You could have more bills than money, and some bills are beyond your control. You might need to borrow more money than you have available, which will result in even more interest on the loan.
The lender can take steps to repossess your property
If you do not manage to pay for the excessive debt, you could go into default, which means that the lender can take steps to repossess your property. That could lead to the foreclosure of your home, and the loss of your family’s financial stability.
Borrowing from your bank when you do not have enough cash will just prolong the problem. When you go to close your account, the bank will run the amount of the loan payment and see how much they expect you to make. It will give you a minimum figure based on your past history and the current rate of interest.
After taking this information, they will do the best they can to make sure that you will not get into default with your credit score. A bad credit history will remain on your credit report for seven years.
However, that does not mean that you have to pay a certain number of payments every month. That is what the bank does – they want to get as much back as possible.
Put in some money in an escrow account
They could, if they were really desperate, have you put in some money in an escrow account so that they have a certain amount to cover the situation. However, they will be in the dark as to what is going on with your account and the progress they are making.
It would be good if the bank could let you know what is going on with your account, so that you can decide whether you want to cancel the loan agreement. If you do not want to, you could have the monthly payments directly deducted from your bank account.
Credit bureaus and other lenders will keep track of every single payment that is made, and they will be able to follow the progress of your account. It is all your responsibility to keep in touch with the lender, so that they can keep up with the loan.