Today, credit has become not only an affordable banking product, but also a means of survival for many people. Very often, by signing two or more loan agreements, a person solves the problem of today and does not think about what awaits him tomorrow.
And tomorrow there may be problems, for example, with work or health, and debt on loans in the meantime in the literal sense of “take by the throat.” So what do people who find themselves in such a difficult situation do? And is there a way to get rid of loans legally?
General description of legal ways to get rid of a loan
It is no secret that debts are formed precisely when there is nothing to pay under the contract. In the event of debt formation, the procedures for credit organizations are familiar to everyone:
- Constant calls to the client and his relatives, as well as to work;
- Penalties and fines are imposed, which are growing every day. The more late payments on the loan, the more you have to pay;
- Transfer of cases to collection companies . Everyone knows that such organizations specialize in “knocking out” money from a client. And to achieve their goal, they use various methods. Therefore, you should avoid communicating with collectors, and not hide, but rather try to solve the problem;
- Debt collection through the court . This measure also does not carry anything pleasant. Based on a court decision, accounts may be seized from the debtor and property may be taken.
As you can see from the list, credit organizations have a ton of ways to get their money back.
What is “Refinancing” loans?
There are many cases when a person takes several loans. It’s one thing – for what purpose he arranges loans, and quite another – how he pays when there are a lot of them. Ultimately, in the life of such an “adventurer” there is a moment at which he can no longer answer for his obligations. In this situation, a loan refinancing procedure may come to the rescue.
Refinancing is the execution of another loan, but for the purpose of repaying all other loans. In this case, the banking institution does not give out money to the client. Usually, the amounts are transferred to the accounts by bank transfer. A new contract is concluded with the bank, which means that both the payment procedure and the interest rate, and therefore the monthly installment, are changing.
However, not every borrower will be able to refinance. In order to improve the financial situation in this way, the client must meet one of the requirements:
- The borrower made contributions on the loan for a period of 6 to 12 months;
- More than six months are left until the expiration of the loan agreement;
- The loan was not previously restructured;
- No loan delays were allowed. In some cases, the bank may refinance the loan even if there are delays, but for a period not exceeding 10 days.
Thus, refinancing is a great way to solve financial difficulties by combining existing loans into one.
What is the meaning of debt restructuring?
Debt restructuring is applied if the client has difficulties with the payment of money on the loan. Moreover, the initiator of such a process should be solely the debtor himself. The bank cannot be aware of the difficulties encountered, therefore, the client must contact the financial institution with the appropriate statement.
Restructuring debt means changing the terms of the contract. However, the bank is reluctant to take such actions, only if there are good reasons. These may include:
- Loss of work, or a reduction in the salary of the borrower;
- In case of illness of the borrower, and as a result, disability;
- In case of loss of a breadwinner, or maternity leave;
- A big burden on the family budget;
- The death of the borrower.
Naturally, the bank will require the availability of documents proving that the client has circumstances that allow restructuring the debt.
It is worth noting that the financial difficulties of the borrower should be temporary, and the credit history of the debtor should be positive.
When a client applies to the office with a statement on debt restructuring, the bank is obliged to provide the service on an individual basis, even if it is not specified in the concluded loan agreement. In addition, bank assistance should be free. Although in practice, the client still has to make some payments.
Thus, the client simply cannot restructure debt due to the creation of more favorable lending conditions. It must be remembered that the process of changing clauses of a loan agreement with a bank is possible only on the basis of mutually beneficial conditions and the presence of good reasons.
Will selling collateral help solve the loan issue?
The most successful solution in the matter of getting rid of debts is the sale of collateral. This is the only way that helps to achieve results without additional red tape and can save a lot of time. However, in reality, the seller has some difficulties.
Firstly, the search for a buyer . Not everyone will want to buy property that is pledged by the bank. After all, after completing the relevant documentation, along with the purchase, debts also pass to the buyer.
Secondly, it’s better to engage in sales yourself . Banks can undoubtedly assist in resolving this issue, but the price they will ask for collateral will be 10-20% lower than market value.
After the sale of property took place, the debtor will be able to repay a significant portion of the main debt. Since the remaining loan amount will become much smaller, the payment schedule will be revised. Naturally, the amount of monthly contributions will become less, which will reduce the burden on the budget.
Why do you need a deferred payment on a loan agreement
A deferred payment is essentially a debt restructuring. However, there are still slight differences. When deferring, you do not need to completely change the terms of the loan agreement. The bank simply shifts the date of depositing money at a later time, while the interest rate and the amount of monthly installments do not change.
A deferred payment is a great way to prevent loan delinquency if a client is faced with temporary financial difficulties. Naturally, during the postponement, the bank needs evidence that the debtor’s solvency has not decreased, and after some time, payments will again come in accordance with the TD bank Routing Number debt repayment schedule.
As practice shows, banks can take such a measure, but no more than once for the entire lending period. Therefore, before asking the bank for a delay, you need to evaluate your financial situation and be sure that the difficulties encountered are temporary.
Is it worth asking for help from guarantors
Another option for getting rid of debt is to resort to the help of guarantors. A surety is a person who acted as a third party when concluding a loan agreement.
The contract should specify the conditions for making payments by a third party in case of delays by the client. In some cases, guarantors are liable throughout the entire lending period.
However, it is not always easy to solve the debt problem in this way. It is one thing when a surety is a close person and can get in a position and really help, and quite another – when, for example, a friend or just an acquaintance who once agreed to help get a loan has to pay for a loan that he did not use.
Such situations, first of all, affect the relationships of people, therefore the help of guarantors is a process that needs to be resorted to in the most extreme cases.
Will Bankruptcy Procedure Help Relieve Debt
In 2014, a law was passed according to which individuals can declare themselves bankrupt and write off all their debts.
However, in reality, everything is not so simple. Any person cannot carry out bankruptcy proceedings simply because he is tired of paying.
In order to declare bankruptcy, an individual must:
- Have a debit amount in excess of 500,000 dollars;
- He really should have nothing to pay. That is, there should not be any property or any kind of cash receipts;
At the hearing, the debtor will need to prove that he can not answer for loan obligations, because, for example, there is no work, or unsuccessful entrepreneurial activity, etc.
Bankruptcy proceedings are conducted no more than once every five years. After the trial, all collateral will be sold at a price lower than the market, and if the proceeds are not enough to cover the debt, the client will be obliged to repay the debt after a certain period of time.
In addition, it is worth resorting to bankruptcy in the most extreme cases, since having paid off the loan overdue, a person will not be able to engage in entrepreneurial activity in the coming years and get more loans.
How not to get into the “debt hole”
No one is safe from the occurrence of debts, however, if you follow certain rules, you can avoid many troubles. These include:
- Before you take a loan, you should adequately assess your financial capabilities . There is no need to shoulder an overwhelming loan, hoping, for example, to increase salaries, or to receive an inheritance. Imaginary possibilities are able to ensure getting into the “debt hole”;
- Many clients refuse such type of services as insurance. In fact, in the event of an insured event, the insurance company will cover all debts to the bank for the client. Insurance cases may include, for example, a reduction in employment, the onset of disability, the death of a debtor, etc.
- If, however, unpleasant situations have arisen in a person’s life related to the return of debts, it is best to turn to qualified lawyers for help. They are able to represent the interests of the client in court, as well as protect against collectors.
The most important thing the debtor should not do is try to avoid meetings with creditors and change his place of residence. It is worth talking about the difficulties that have arisen immediately and openly. Only in this way it is possible to resolve the issue of legal debt relief.