Loan debt calculation: how to check and challenge it

Have you received a claim or notice from the bank with a debt amount that seems inflated? Perhaps you have already missed payments, and now the bank is demanding the whole amount back at once. In such a situation it is easy to panic and simply pay, but that is not always the right thing to do. The amount in the claim may have been calculated with errors or may include unlawful commissions. Before agreeing or going to court, it is worth looking into the details.

Many people think the bank does not make mistakes and accept its calculation as a given. Practice, however, shows that errors in calculations, double-charged interest, and the inclusion of insurance and penalties are not uncommon. If you do not check the debt, the court may award the entire amount, even if it is unjustified. In this article we will look at how to check a loan debt calculation, which documents to request and how to challenge the debt if it is inflated.

Loan debt calculation: what the bank is claiming

When a borrower breaches the payment schedule, the bank sends a notice of early recovery and attaches a loan debt calculation. The amount usually consists of three parts: the principal debt, the remuneration and the penalty (a late-payment charge or fine). Each figure should be checked against the loan agreement, the payment schedule and the actual dates on which the money reached the account.

By law, the borrower has the right to request from the bank a statement of account and a breakdown of the calculation, and a refusal can be appealed. Request the document in writing and check it against the following: whether the principal amount is correct, whether interest has been charged on the part already repaid, for what period the penalty has accrued, and whether there is any double charging of a penalty.

• the principal and the dates of its actual repayment
• interest: rate, period, outstanding balance
• penalty and fine: for what period and at what rate
• payments the bank failed to take into account

Calculation of debt under a loan: limitation period and recovery

The point from which the limitation period for loan debt starts to run depends on the structure of the payments. Where repayment is made according to a schedule, the period runs separately for each overdue payment: three years from the date on which the bank should have received the next amount. Where the entire debt is demanded early, the limitation period is also three years, but for the whole amount it is counted from the end of the period the bank set in its demand for early repayment. An acknowledgement of the debt by the borrower interrupts the period, and it starts to run afresh.

Missing the limitation period is an independent ground for dismissing a claim, but the court does not apply it on its own initiative. The limitation period must be raised before the decision is handed down; it cannot be relied on later. In practice, when recovering loan debt, the limitation period is checked for each payment and for the demand for early repayment — this makes it possible to exclude hopeless amounts. A bank, as a legal entity, cannot have a missed period restored, and the application to apply the limitation period is made in writing: in a statement of defence or by a separate motion. The mistake is silence in the proceedings: if it is not raised in time, the court will award the entire amount.

What will be useful in preparing the application:

• the loan agreement and the repayment schedule;
• a statement of account for the entire period;
• the bank's demand for early repayment (if there was one);
• the bank's calculation broken down by date;
• written evidence of acknowledgement of the debt, if you signed any.

The procedure for recovering loan debt out of court

Pre-trial recovery of loan debt usually begins with the bank's demand for repayment. In that document the creditor states the amount of the debt and the period for voluntary settlement, after which it may go to court. The borrower should respond in writing: propose restructuring or a deferral, setting out the reasons for the delay and attaching supporting documents.

At the pre-trial stage, the procedure for recovering loan debt depends on the negotiations and the evidence gathered. It is important to record the correspondence with the bank and to keep copies of payment documents. If no agreement is reached, the recovery of overdue loan debt moves into the courtroom, where these materials will help to check the creditor's calculation.

• Keep the bank's demands and your replies to them
• Record the correspondence in the app and on paper
• Keep copies of receipts and account statements
• Prepare documents on income and valid reasons

Pre-trial documents will be useful for checking the debt calculation.

Calculation of debt under a loan and early recovery

A bank starts early recovery of debt under a loan agreement in cases of systematic breach of payment deadlines — for example, if you were late several times in a row. Before going to court, the bank must notify you of its demand to repay the entire loan: a letter, SMS or message in the app. If there was no notification, that alone is grounds to object to the claim.

When a bank files a claim to recover debt under a loan agreement, the court checks the calculation: inclusion of insurance and commissions, incorrect order of writing off payments. Objections are built on these errors — then the judgment on recovery of debt under the loan agreement can be challenged. What to check first:

• Write-offs went first towards penalties, not the principal debt
• The calculation includes insurance and commissions that are not in the agreement
• Your payments were not taken into account or were attributed to the wrong period
• The amount of the penalty is clearly disproportionate to the delay

Judicial practice in recovering debt under a loan agreement

Judicial practice in recovering debt under a loan agreement shows that courts do not take the bank's calculation on trust but verify it against primary documents. If the statement includes commissions or insurance premiums rolled into the principal debt, or the borrower's payments are not accounted for, the court reduces the amount claimed. On credit cards, the inclusion of insurance and commissions that were not agreed with the client is most often challenged.

In cases involving recovery of debt under a loan, courts also assess whether the penalty is proportionate: where it clearly exceeds the principal debt, the court reduces it. A court decision to recover debt under a loan agreement can be appealed, and at the enforcement stage one may apply for an instalment plan. A borrower should check in advance which amounts the bank has included in the calculation and on what basis, and prepare their objections.

• Check every payment in the statement against the actual debits.
• Check whether insurance and commissions are included in the principal debt.
• Apply for a reduction of the penalty if it is clearly disproportionate.
• Appeal the decision or ask for an instalment plan for enforcement.

Calculation of debt under a loan: checking the statement and documents

Calculation of debt under a loan starts not with the figure in the bank's claim but with the documents. Request from the bank a statement on the loan account and the card account for the entire period, a breakdown of the calculation by component, and a copy of the loan agreement with all supplementary agreements, tariffs and the payment schedule. They are obliged to issue these documents, and they will also be needed for objections in court if the matter goes to a dispute.

Once you receive the statement, check it step by step: the date and amount of each payment, how the bank allocated the funds received — towards the principal debt, the remuneration or the penalty, and whether the balance matches your own arithmetic. On a credit card, the calculation includes the principal debt, remuneration, commissions and insurance, and judicial practice in recovering debt on a credit card shows that courts exclude commissions and insurance not agreed in the agreement from the calculation. Red flags: debits you did not make, remuneration charged on an already repaid part of the debt, money debited for insurance or commission without your consent, and duplicated penalties and fines.

Record any discrepancies in writing — this is the basis for objections.

Calculating loan debt: how to challenge it in court

If you receive a claim for recovery of loan debt, do not leave it unanswered: the court will consider the case on the bank's documents. First, collect the loan agreement, the payment schedule, the account statement, and correspondence with the bank. Check every amount: calculations often include insurance, commissions and penalties that you never accepted.

File your objections in writing, before the hearing on the merits begins: set out your own calculation of the loan debt and attach supporting documents. Errors in the bank's calculation, including charges made after the agreement was terminated or on amounts already repaid, are checked by the court on the basis of your objections.

If the limitation period has expired, state this directly in your objections: the court applies it only on a party's application and will not take it into account on its own. A judgment issued without your participation should be appealed within the established time limit — a missed procedural deadline will have to be restored by a separate application.

What to prepare for your defence:

• the loan agreement and payment schedule;
• the account statement for the entire period;
• correspondence with the bank about restructuring or a deferral;
• your own counter-calculation of the debt.

Until you check the loan debt calculation, you will not know how much you actually owe. Unjustified amounts can be challenged in court, but this requires documents and a proper analysis.