Avoiding loan default: what to do if you have trouble making your credit payments?

 Tips from loan brokers

When someone wishes to contract a loan, it is highly recommended for the future borrower to draw a detailed budget of his incomings and outgoings.

“Clients will have to put all spending on a cash-aware control (what is important, expenses you can afford to skip, amount available), according to your income. Accessing a loan requires a medium to long-term budget planning, with seasonal adjustments and solutions in more difficult times or every time your situation changes from the initial one”, said Anca Bidian (photo), CEO Kiwi Finance.

Statistics from other countries, with long lending history, shows that this type of events can appear almost 5-6 times over a mortgage period (unforeseen events – divorces, marriages, accidents, temporary loss of job, relocation, economic contraction, etc).

Kiwi Finance, who gives legal counseling in the precursory phase of a credit contract, noticed that over the past two months, this type of requests came from non-Kiwi clients in the moment of contracting the loan, and now they have to deal with unforeseen events or misunderstood provisions in the contract.

Should we try to renegotiate with the lender?

When credit default issues come to sight, both borrowers and lenders are due to seek a solution to overcome this moment, in the interest of both parties, brokers say.

“In finding a solution to solve this problem, the bank reviews the client’s profile and its prior payment behavior, type and characteristics of the loan in question, collaterals, and the client’s exposure to other objective factors that led him here”, Bidian stressed.

As she commented, the client’s vision in his future actions to overcome this situation plays a major role in helping the borrower avoid default.

“You must consider that sooner or later, the crisis will end, and lenders will start hunting again for clients and market share, while borrowers will need plans and credits to finalize them”, said the CEO of Kiwi Finance.

Unfortunately, the rising currency exchange rates, as well as the loss of job drive borrowers to no longer afford their monthly credit payments.

“For those in default, our advice is to contact the lender, and let it know where he stands. The purpose of the bank is to cash in the installments, and not to play the role of a real estate agency, retrieving the loan by selling the mortgaged property”, said Liviu Andrei, executive director of credit brokerage firm, DBSol Consulting.

The bank has all the interest to work with you, whether by deferring payments or drawing a new payment plan.

On the other hand, Liviu Andrei noted, borrowers will have to bear in mind the possibility of being registered as bad debtors, which will ban them from accessing new loans in the future.

“The payment behavior of borrowers is tightly connected to their financial situation. It is very important the banks to understand and review their client’s situation”, said the representative of DBSol Consulting.

There is one thing left the borrower should know when dealing with default. The credit company is usually proceeding with a legal action to recover debts, if the borrowers show no intention of wanting to pay their debts, or if there is no other option.

“If a person is defaulting on their loans due to pay reduction or job loss, it is recommended to contact the bank and to talk to the officers of the credit company to defer payment plan – on a longer timeframe, enough to reduce the monthly payment. If the borrower cannot afford to pay the full installment, he should pay at least a part of it”, said Alexandra Rusen, B2C collection coordinator at Coface Romania.