Prolongation implies the extension of the deposit agreement. Auto-rollover is popular, which does not require a visit to a branch to conclude new securities. This service can be provided on different terms.
Prolongation means the extension of the contract. The term is found more often in the insurance and banking sector. Today many financial institutions offer this service for deposit accounts. Auto-rollover is convenient for both the bank and the client. It does not require a visit to the office to conclude a new contract. One of the very first banks to offer such a service is Sberbank. Less commonly, we are talking about loans when, due to certain circumstances, the term for making payments increases.
Features of the extension of the deposit
Prolongation is carried out for the same period, but with the interest rate on this banking product, which is valid at the time of auto-renewal. Usually, the subsequent servicing of the contract takes place at a lower interest, the next day after the expiration of the contract. But this condition is spelled out in the official papers filled out when opening an account. You can find an institution that will ask you to keep your renewal interest.
There are several basic conditions for prolongation:
- term is equal to the initial term of the deposit;
- a new period begins immediately after the end of the previous one;
- if the income for the previous period was not withdrawn, new interest is charged on the entire amount;
- the previously set rate is changed to the current one.
What points should you pay attention to?
There are two main types of contract renewals. You can find out which one is relevant for you through a contract. The first type does not require attendance (automatic renewal). The account is closed and opened without a personal visit to the client. This type is the most demanded. The second type includes mandatory personal presence. A few days before the end of the agreement, the client is obliged to come to the bank to renegotiate the agreement.
Attention is drawn to the renewal period, the size of deposits and rates, but there are also pitfalls. If the type of deposit was excluded from the product line, the rate may drop significantly, down to 0.1% (these are the rates that apply to demand deposits). The bank is obliged to notify the client about the change in interest using a short message, but this often does not happen.
According to the legislation, the percentage may change at the time of auto-rollover, but it remains until the end of the term. If for some reason this indicator has decreased at another time, the client has the right to clarify the relationship with the institution. Therefore, it is recommended to keep track of your deposits if there is a lot of time left before the expiration of the contract. This can be done:
- by calling hot lines;
- online on the official website;
- in the department or office of the institution.
The manager is obliged to remind you when the contract expires. The client has the right to come on this day if he is going to collect money and income or use other banking products with more favorable conditions.
Pros and cons of prolongation
The advantages of such a function include convenience for the depositor and monetary gain. The renewal can be carried out an unlimited number of times. The client saves his time as he can continue to receive passive income without any effort. This is also convenient if it is impossible to visit the branch at the time of the expiration of the deposit agreement. The depositor continues to receive profit without interruption in the calculation of interest.
The disadvantages include not always favorable conditions for renewal, loss of interest. Small commercial banks with a dubious reputation may have problems with withdrawals after renewal.
If you do not want to face difficulties, read the agreement carefully, ask questions to the bank manager. The best option is to open accounts to save money and make profit in large financial institutions with a good rating and reputation. Please note: when renewing, a new contract is not issued. All the terms of such a transaction are immediately written into the original contract. If the institution is declared bankrupt, the presence of the deposit can be confirmed by providing the old agreement.
