Not all clients are responsible for their credit obligations. The loans from microfinance organizations are considered frivolous at all. Short terms, ease of application, small amounts resemble borrowing from a friend, and not a complex banking operation. Only after a while the debtor asks the question: “What will happen if I do not pay off the loan?” In fact, delay or refusal to repay a loan can cause serious problems.
What if I have no money to pay?
Unfortunately, there are situations when you have no money to pay off a loan. Delayed paycheck, illness, job loss, high leverage are the main causes of financial troubles. There are certain solutions that allow the debtor to improve the situation. If you have no money to pay off the loan, then you can:
- Apply for a renewal. It’s an extension of the loan term. It is necessary to write a statement on the need for the loan prolongation. If approved, the contract term will be changed. The appeal will allow you to avoid delays, which means that your credit history will remain intact. You should bear in mind that the organization has the right to refuse a client such a request. Prolongation of payday loans is provided on a paid basis. It is allowed to repeat the extension several times;
- Restructure the debt. The restructuring allows you to reduce the payment by increasing the term of the payday loan but does not eliminate the need to make a payment. To restructure your debt, you will need good rea-sons: confirmation from the hospital about the illness, a certificate from the personnel department about the delay in wages. You can complete the restructuring in person at the office of the lender. The latter is capable of both making concessions and refusing;
- Refinance the debt. Debt can be repaid with credit funds. Money is lent by other microfinance institutions, large banks. However, clients who are interested in whether it is possible not to pay a loan and resorting to such a solution to the problem often encounter an increase in debt according to the principle of a “snowball”. Interest will have to be paid for both the first and the second loan agreement. A credit card with a grace period can become a calculation tool. It will help avoid double overpayments.
In a difficult financial situation, you should contact the lender immediately. It is important to do this before the delay occurs. Otherwise, a late payment will become the basis for refusal to prolong, restructure and refinance the loan.
What are some consequences of not repaying a loan?
The law stricter regulates the activities of microfinance institutions and collection offices cooperating with them. The times of threats of physical violence, psychological violence, vandalism in the entrances are a thing of the past. However, if you refuse to make payments, troubles cannot be avoided. If you do not repay the loan, this can result in:
- Penalty under the loan agreement. There is both an accrual for the very fact of delay, and a penalty. The penalty amount can be fixed or increase exponentially. At the moment, the maximum amount of the penalty is not limited by law;
- Transfer of business to collectors. Employees of collection firms call home phone numbers, relatives, and work. This leads to psychological discomfort. Sometimes representatives use illegal methods: they throw out leaflets with a portrait of the debtor, spoil the door peepholes, and scratch cars. In this case, you should immediately contact the police;
- Confiscation. If all of the above methods turned out to be ineffective, then the borrower’s property may be sold. Furniture, appliances, real estate, vehicles can be described.
An online loan or funds received at the lender’s office do not differ in the list of penalties. Deviation from the loan agreement entails entering information about the delay in the credit history.
In the future, this threatens:
- Refusal of large banks to obtain a mortgage, car loan;
- Inability to open a credit card;
- Difficulties in obtaining new loans.
Some employers check the credit histories of potential employees.
In the case of large debts, numerous delinquencies may simply not be taken to a good position.
Is the case taken to court?
The microfinance organization sends cases of serious defaulters to court. This threatens:
- Additional costs for the payer. When the debt is transferred to the court, an enforcement fee, fines and penalties are added to the debt. It is 7% of the amount owed;
- Sending information to work. The bailiffs send orders to the employer to withhold wages in favor of the creditor;
- Prohibition to travel abroad. If the amount of debt exceeds a certain amount, then the borrower will not be released outside the United States until the amount of payments is made.
There are ways to resist the initiated legal process.
| Option | Detailed information |
| Prove the illegality of the concluded loan agreement | An extremely complex procedure that requires professional knowledge. If there are none, then you will have to spend money on a lawyer. If the process is lost, all legal costs are paid by the borrower. |
| Prove your insolvency | If there really is nothing to take from the client, then the bailiffs will have to retreat. However, this will take a long time: employees will persistently come and check for items available for confiscation. |
| Declare yourself bankrupt | The bankruptcy procedure is carried out for individuals with major loan arrears. If the arbitration court takes the side of the borrower, declaring him/her bankrupt, then all debts are written off. In the future, the borrower should forget about loans of any kind forever. |
Conclusions
Taking a payday loan imposes certain obligations on the client. If the opportunity to make payments is lost for a while due to objective reasons (birth of a child, death of a loved one, dismissal), then it is possible to revise the loan conditions in the interests of the borrower.
However, the loans will have to be paid in any case.
The exception is the bankruptcy of individuals and the absence of any property. These are extreme measures, which further prohibit taking out payday loans and working as an individual entrepreneur.
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