Not all borrowers see what difficult consequences may arise in case of delay in the loan, and then they have to pay heavy fines and interest on the loan. This material will present the consequences that may arise in case of untimely payment of the loan, as well as provide effective recommendations on what to do in such situations when there is nothing to pay the loan.
What are the reasons for non-payment of a loan?
- Incorrectly calculated personal budget, because of this it is not possible to allocate funds to pay debt;
- Due to the loss of a person’s job or position, the minimum income that cannot cover all debts on the loan;
- The person has more urgent expenses, for example, urgent payment for medical services, unforeseen repairs or a trip;
- A person simply forgot about paying a loan or does not want to do it.
To avoid such troubles, many lending companies call borrowers and reminds them of loan debt. More serious actions are taken by the company only when the borrower begins to ignore all warnings and reminders.
Measures taken by banks with debtors
If the client forgot to pay only once, then the bank can simply charge a daily fine, the amount of which is indicated in the loan agreement. Also at this time, the user can receive calls and reminders about paying a loan, as usually happens within 60 days.
If the client ignores the bank 2 months later, the financial institution has the right to such actions:
- Transfer the debt of the borrower to a partner credit organization, which will be able to influence it using its own methods of repaying credit debt
- Also, the bank can sue, which can bring even more problems, so the court can prohibit the borrower from going abroad, seize the user’s accounts, and also make a tax request and seal the debtor’s property;
- The bank can also attract collection services, this method will act psychologically, it applies to dishonest customers. Here collectors can come to the address of residence, threaten, call at 3 nights.
As practice shows, it is still better for the borrower to contact the bank and negotiate on his own, so you can avoid trouble, extend the loan period or arrange a restructuring.
What do MFIs do when a loan is not paid?
Each microcredit company has its own waiting period for non-payment of a loan when the debt is not critical, but a penalty is charged to the total amount. On average, companies give 30 days for the borrower to repay the entire amount of the loan or reissue an online loan. If this period is already coming to an end, and the user does not want to correct the situation, then microcredit organizations may resort to more serious methods:
- The service submits information to the Credit History Bureau, which can greatly affect the credit history of the borrower;
- Here they can also connect collectors that will psychologically influence the debtor;
- The organization can go to court and then there will be a long process to pay the debt.
In order to avoid such difficulties, it is important to notify the credit institution in advance of the difficult financial situation and ask for a loan extension. So, the client will just have to pay interest on the loan, but the loan body itself can be paid later, when financial difficulties pass.
What are the actions of the debtor?
First of all, what the debtor needs to remember is that you should not panic and avoid communicating with credit organizations. Even the most difficult issue can be resolved peacefully by concluding a new, more loyal contract for the borrower. If the client is afraid to receive an overdue loan, it is better to immediately issue a prolongation or restructuring of the loan, so that it will be possible to avoid debts and fines, besides, no less important, the credit history will not suffer and will remain positive.