When reviewing the Law on Obligations, toward the end, under the section on loan agreements, we find the provision of Article 1068(2), which states that the borrower may repay the loan before the term stipulated for repayment, but is obliged to notify the bank in advance. Paragraph 3 of the same article adds that the borrower is obliged to compensate any damage suffered by the lender, while paragraph 4 prohibits the bank from charging interest for the period between the date of repayment and the date on which the loan should have been repaid under the agreement.

Early repayment is regulated in more detail by Article 48 of the Law on the Protection of Financial Service Consumers (Official Gazette no. 19/2025). Thus, the borrower has the right, at any moment, to fulfill his obligations under the loan agreement, in full or in part. In such a case, he is entitled to a reduction of the total cost of the loan in the amount of the interest and all other fees charged in favor of the lender for the remaining duration of the agreement.

And how is the damage mentioned in Article 1068 paragraph 3 defined? According to Article 48 paragraph 10 of the Law on the Protection of Financial Service Consumers, the damage is the difference between the interest rate agreed with the borrower and the market interest rate at which the bank can place the amount received by early repayment at the moment of that repayment, including administrative costs. The market interest rate is defined as the average weighted interest rate for that type of loan published on the NBS website.

The provisions of Article 48 of the Law on the Protection of Financial Service Consumers apply mutatis mutandis to leasing agreements.

Procedure for early loan repayment

As already explained by the Law on Obligations, the borrower must notify the bank of his intention to repay early, and the procedure is explained in Article 48 of the Law on the Protection of Financial Service Consumers, which also provides more detailed rules on the limitations regarding the amount of the fee and for which types of loans it may be agreed.

Namely, when the borrower requests early repayment, he submits a request to the lender. The bank, as the lender, is obliged to provide the borrower in written form with all information necessary to understand the consequences of that decision. This includes, for example, the amount of reduction of the total loan cost for the amount of interest and fees, including the proportional reduction of any one‑time fee charged, as well as the amount of the early repayment fee the borrower is obliged to pay to the lender.

Within 3 business days from the date of submitting the request for early repayment, the lender must enable the borrower to effect repayment. The date of early repayment is considered to be the date on which the borrower provided the funds in the bank account for the purpose of carrying out the early repayment.

Fee for early loan repayment

The lender may stipulate an early repayment fee in two situations: if a fixed nominal interest rate was agreed for the period of early repayment, and in the case of housing loans (and loans intended for the purchase of real estate) if a fixed or variable nominal interest rate was agreed.

This fee may be agreed up to the amount of the damage suffered due to early repayment, but not more than 1% of the amount of the loan repaid early if the period between early repayment and the contractual maturity is longer than one year, and if this period is shorter, then the fee may not exceed 0.5% of the amount of the loan repaid early.

When may this fee be charged, and when not?

It is important to note that the lender may charge this fee only if the amount of early repayment within a 12‑month period exceeds 1.2 million dinars, and the fee itself may not exceed the amount of interest the borrower would have paid during the period between early repayment and the contractual maturity date. This means that you may repay up to 1.2 million dinars per year without paying a fee.

However, the fee may not be charged in cases where repayment is made on the basis of an insurance contract concluded for the purpose of securing repayment, in the case of authorized overdrafts or credit cards, or if repayment occurs during the period for which a variable nominal interest rate has been agreed (except for housing loans).

Finally, the fee may not, under any circumstances, exceed the amount of interest the borrower would have paid during the period between early repayment and the contractual maturity date.

Note: This text expresses solely the personal opinion of the author and does not constitute legal advice.