When there is barely enough money to live on, paying off loans becomes an unbearable burden for a person. Together with an expert, we figured out what will happen if you do not pay a loan to a bank, how to delay payments and get rid of debts.
People’s lives have become easier with the advent of loans – now you can buy cars, real estate and other things using funds issued by a financial institution. However, not all borrowers can return the money on time. In this article, we tell you what will happen if you do not pay a loan to a bank, and what to do in these cases.
If the borrower misses a loan payment , he will face a one-time fine. This will also have a negative impact on the credit history, and in the future the person may have difficulties in receiving money from the financial institution.
Situations vary, people can miss a payment due to forgetfulness, illness , dismissal , or salary delays. In such cases, banks advise depositing funds as quickly as possible – this will reduce the amount of the fine.
Deputy Director of the Belgorod branch of Rosselkhozbank Roman Marchenko notes that if the monthly payment is overdue, the following negative consequences occur for the borrower:
- accrual of penalties/fines on overdue principal and interest. Depending on the type of credit product – up to 0.1% daily;
- placing a corresponding mark on the borrower’s credit history.
What happens if you don’t pay the loan at all
As we have already noted, the defaulter will first of all face financial sanctions from the bank. If the borrower has missed several payments or has stopped paying the debt altogether, this may lead to more serious consequences. Let’s consider them in more detail.
1. Deterioration of credit history
It will get worse with each accrued penalty. With a bad credit history, the borrower may not be given a loan at all in the future. In some cases, financial institutions may also refuse to refinance an existing debt.
2. Accrual of fines
The calculation of the penalty depends on the amount of the debt, the terms of the loan and interest, and not on the entire loan. At the same time, the Bank of Russia has set limits on the amount of the penalty. It should not exceed 20% per annum or 0.1% per day of delay (1).
3. Calls from collectors
A credit institution can sell a debt to a collection agency. As a rule, this happens with problem loans, with borrowers from whom it is difficult to collect money. Employees of these organizations will start calling the debtor demanding that the funds be returned.
4. Demand to pay off the entire debt
Financial institutions may require the borrower to repay the loan with interest within the specified period. In case of violation of the agreement, the bank may terminate it unilaterally (2).
5. Appeal to court
The credit institution also has the right to go to court. A case will be initiated against the defaulter. After that, the Federal Bailiff Service will collect the debt. The debtor’s accounts will be blocked. Almost the entire salary will be written off in favor of the loan, leaving only the minimum subsistence level necessary for survival. In some cases, the person also faces the risk of selling the property at auction.
“If the loan is not repaid at all, then in addition to the accrual of fines and penalties, the bank has the right to demand the remaining amount of the loan ahead of schedule with all the ensuing consequences within the framework of the law on enforcement proceedings, starting from a ban on registration actions and travel abroad and ending with the seizure and sale of the debtor’s property to pay off the debt,” Roman Marchenko emphasized.
How does pre-trial debt collection work?
At this stage, the bank tries to settle the issue without going to court. There are two stages of this type of collection:
- soft-collection: the client is notified by phone that he has an overdue payment;
- hard-collection: they will try to contact the debtor personally and demand that he pay off the debt. The person will also be offered options for debt restructuring.
“Pre-trial collection is carried out exclusively by communicating with the debtor both by phone and in person. The person is required to find out the reasons for missing a payment. Then the consequences of non-payment are explained and the client is returned to the schedule with the restoration of payment discipline. If the borrower has found himself in some difficult life situation, then the possibility of providing him with restructuring under the agreement is worked out,” explained Roman Marchenko.
What happens if the bank sues for non-payment of a loan
If the credit institution wins the case, a writ of execution will be issued, the document will be transferred to the bailiffs. The person will be obliged to repay the debt within a certain period. If the borrower does not do this, the collection of funds will become compulsory. Let us list the consequences that await the defaulter in this case.
1. Arrest of accounts and cards. Funds will be blocked or written off to pay off the debt.
2. Seizure of property. In some cases, property will be seized and sold at auction. The exception is the only housing, it cannot be sold at auction.
3. Ban on traveling abroad. It will not be possible to go on vacation or a business trip – the debtor will be detained during a document check. The restriction will be lifted after full settlement with the bank.
4. Prohibition of registration actions. A person will not be allowed to carry out any registration actions with cars and real estate.
By the way, if enforcement proceedings have begun, the debtor has the right to file an application for the retention of wages and other income in the amount of the subsistence minimum established in the constituent entity of the Russian Federation at the place of residence (3).
What to do if you have nothing to pay the loan with
If you need to pay a loan and you don’t have any money, first of all you can find new sources of income – sell your property, ask your relatives for help. If this is not possible, there are several other options. Let’s look at them in more detail.
1. Apply for a credit holiday
This is a temporary suspension of monthly payments. This period is given to the borrower to solve financial problems. It usually lasts from one to six months.
| pros | Minuses |
| No sanctions from the bank, no damage to your credit history | The total term of the loan is extended |
| Credit holidays can be issued only once. But if a person has several loans, a grace period can be obtained for each of them | Interest continues to accrue |
| The borrower is completely exempt from paying the loan for this period. | People and companies whose income has decreased by more than 30% can apply for a holiday |
2. Contact the creditor with a request for restructuring
The credit and financial company may change the terms of debt repayment. The restructuring process includes extending the loan term, reducing the interest rate, or changing the monthly payment schedule.
| pros | Minuses |
| The size of monthly payments is reduced | The cost of credit is increasing |
| The ability to avoid late payments and maintain a perfect credit history | In some cases, you will have to pay a commission. Banks may charge for additional services. |
3. File for bankruptcy
When there is absolutely nothing to pay with, the debtor can file for bankruptcy . An important condition is that the procedure is suitable for those who have no income or property that can be used to pay off the debt. Note that there are two types of bankruptcy: judicial and extrajudicial. The first is carried out for debts of 500 thousand rubles, the second – from 25 thousand to 1 million rubles.
| pros | Minuses |
| It is possible to get rid of all debts | The debtor’s property may be sold at auction. The funds will be used to pay off the debt |
| The borrower’s financial situation improves | The funds are controlled by a financial manager. The person will receive only the minimum subsistence level |
| There are restrictions on the positions held after a person is declared bankrupt. For example, he will not be able to head financial and insurance companies or manage a legal entity. The restrictions last for at least five years |
4. Refinance the loan
This is the process of fully repaying loans by taking out a new loan. To use refinancing, you need to contact the bank with which you have an agreement or any other credit and financial institution. The funds received from the new loan will go towards repaying the old one.
| pros | Minuses |
| The more favorable rate will reduce your monthly payment | It is not possible to refinance with outstanding overdue payments |
| It is possible to combine several loans into one | The loan rate may be higher |
| It is possible to choose a bank with a lower interest rate, thereby reducing overpayments | Most often, you can refinance a loan received more than six months ago. |
Expert Reviews
Roman Marchenko spoke in more detail about the consequences of non-payment of debt to the bank.
“If the borrower is not considered malicious, and the violation of payment discipline arose due to objective reasons, then the client can be provided with a restructuring with an extension of the agreement. It is possible to consider the possibility of providing a credit holiday or to conclude a settlement agreement with the client. If the payer is dishonest, then, as a rule, he files an application for recognition of bankruptcy,” the expert noted.
what will happen if you do not pay a loan to the bank
Let’s sum it up and remember what awaits a person if he stops paying off his loan debts.
1. If a monthly payment is late, the bank may charge penalties and fines.
2. For prolonged failure to make payments under the loan agreement, the bank may go to court.
3. The defaulter can expect:
- seizure of accounts and property, sale of the latter at auction;
- ban on travel abroad.
4. To avoid consequences, the debtor can:
- apply for a credit holiday;
- take advantage of refinancing or debt restructuring;
- file for bankruptcy.
List of sources:
1. Information letter of the Bank of Russia dated 08.07.2021 No. IN-06-59/48 “On the specifics of accrual by creditors of penalties (fines, penalties) for failure to fulfill or improper fulfillment by the borrower of obligations to repay a consumer loan (loan) and (or) pay interest on the amount of a consumer loan (loan).