Signing a loan agreement is a very big responsibility. Each lender analyzes the client in terms of repayment possibilities. Monitoring of creditworthiness is the basis for the functioning of retail banks, parabanks and alternative loan institutions.
What about when economic crises and random conditions in the household budget occur? What to do in case of problems with paying off the cash loan? Does the retail bank or any other lender come to the customer honestly in such situations? Below are some answers.
The lender has the right to terminate the loan agreement
Banking Law clearly defines when a retail bank terminates a loan agreement. This is the moment when the borrower loses the ability to settle obligations on time. When the terms of the loan agreement change due to random factors, the lender legally follows a similar arrangement.
Contract termination occurs on two dates. It is seven days (for total bankruptcy) and up to thirty days in other cases. During this period, however, you have the chance to negotiate new terms for repayment of your cash loan. This approach pays off very well. Negotiations with the bank usually end with savings compared to problems with debt collection proceedings. What can you do in a crisis with loan repayment?
Debt restructuring methods
The most popular activity is signing an annex to the loan agreement. Most often, the borrower chooses to extend the cooperation period, while reducing monthly installments. Extending your loan repayment is naturally a higher cost. In the case of very large economic problems of borrowers, e.g. large business owners, retail banks agree to a longer suspension of their loan repayment.
You can fight for suspension of repayments, for limiting the sum of penalty and standard interest, for debt cancellation (in special cases). If you secure a cash loan with large non-current assets and you experience liquidity problems, you run the risk. The lender will most often use the collateral and the contract will simply be terminated. Debt consolidation is another popular method of debt restructuring. In loan consolidation, you turn many liabilities into one, usually very long and with low installments.
The consolidation assumes repayment of credit cards, closing credit limits on a personal account, settlement of installments in cash loans, in payday loans. In addition, when consolidating loans, you order the closure of all liabilities to specialized entities. You don’t do the formalities alone. And this limits potential problems.
Recovery program from the perspective of the borrower – entrepreneur
Complicated repair programs necessary for further loan repayment often require additional financing. Paradoxically, an additional loan from the lender results in faster repayment due to the dynamic development of the business venture. This is a very popular practice among borrowers – entrepreneurs. Protecting your interests after signing the loan agreement is simply key.
If you notice disturbing signs of deterioration in liquidity, report to the bank immediately. Use the skills of professional negotiators or experienced credit brokers. Never risk debt collection. If it occurs, familiarize yourself with the concept of consumer bankruptcy. What debt restructuring methods do you consider optimal?