Severe deterioration of the borrower’s financial standing during the loan period. The reason can be: loss of health, work, change in family situation;
An unexpected increase in the cost of buying or building an apartment or house. The reason may be a breach of contract by the developer, construction company and the like.
The bank’s conduct in the event of non-payment of loan installments
A common interest of both the bank and the borrower is to avoid the consequences of defaulting on a loan. What happens if the loan is not repaid? When a natural person is in arrears with payment of installments, the bank sends a reminder.
In such a situation, the bank must also disclose to the financial supervision the fact that a bad credit has been granted and create appropriate reserves – this is quite a burdensome obligation for the bank, as it bears the cost of both the unpaid part of the loan and the cost of maintaining provisions for bad loans.
Therefore, the bank will put pressure on the borrower to meet its obligations as soon as possible, and if it is not able – the bank will try to take over the collateral as soon as possible or look for other solutions: such as restructuring the loan or its recovery.
What to do to avoid real estate execution?
As already mentioned, another way to pay back the loan is to restructure it. What is it about? Restructuring means changing the loan repayment terms to a more favorable one for the borrower.
Banks assume that it is better to accept small losses resulting from postponing the repayment date (and often also to reduce their size) than to bear the risk associated with debt collection and subsequent enforcement proceedings. For the customer, this is a convenient way to debt-free real estate.
It should be remembered that banks decide to restructure only if they are sure that the loan will be repaid in the future. In such a case, an annex is made to the contract, according to which the loan repayment is postponed or divided into smaller installments.
Professional loan restructuring
Often, people are not aware of the possibility of restructuring the loan, or do not have practical legal knowledge on the subject. They are getting into more and more financial problems and the bank is starting debt collection activities.
Where to look for help then? One option is to use the services of a company whose business is debt relief – restructuring of liabilities. Professional companies have a staff of lawyers with appropriate knowledge and experience, allowing them to find the optimal solution for both parties – both for the bank and the debtor.
Thanks to such actions, the bank will avoid major losses and the debtor will receive new repayment options, thus avoiding dangerous execution of the property.