If a payday loan lender or a bank cannot force the debtor to stick to the payment schedule, he/she can sell the debt to the collectors. The law does not prohibit this procedure, therefore it is carried out by the majority of lenders, especially banks. If you just started to make delinquencies on the loan, then the sale of the debt is still very, very far because this can be called an extreme measure. Why the lender may sell the debt to a collector? The lender gets rid of the debt, selling it to the collection agency for cheap.
If collectors came to you, this does not mean that the lender sold the debt. Some borrowers mistakenly assume that the bank sold the debt if collectors began to call the debtor. But this is not so, selling debt is an extreme measure, which usually occurs in a certain period after the beginning of the formation of the delay. This procedure can occur even after the bank has organized a lawsuit.
To begin with, the bank simply appeals to the collection agency to help it influence the debtor. Then the collector begins to harass the citizen, call him, come home and to the office. But selling debt is a completely different action.
Is It Possible to Reschedule Your Loan Repayment?
It is clear that lenders also suffer from overdue debts, they lose profit and suffer losses. Not only does the borrower not return the borrowed money, we also have to spend our own resources on the recovery procedure. Pay security services or enter into contracts with collectors.
As a result, banks can make profit in the form of penalties and fines imposed on the borrower, but not always the case ends in full payment of the debt. In addition, the cost of the recovery process may not be covered at all. So, it turns out that it is even more profitable for banks to engage in a dialogue with a borrower who finds himself in a difficult situation. Of course, provided that the citizen himself is interested in solving the problem and he is really interested in the delay in payment on the loan.
In any case, the postponement is a voluntary matter for the bank. The borrower can either get a refusal or an offer to reschedule the loan. Today, this aspect is not regulated by law, so everything happens at the discretion of the lender. The situation with the payday lender is a bit easier. You will be able to extend the loan paying additional percentage.
You Need to Delay the Loan: Take the First Steps
It is better to deal with this issue in advance, while the mere fact of an overdue payment has not yet come. If you understand that further payment of credit debts becomes a problem for you, immediately contact the bank. You can initially call the payday lender or a bank lender. Payday laenders usually work online offering to get fast money via the Internet. The fact is that such a matter as the postponement of loans in banks is decided in a special department, it can be a security service, a debt collection department or something like that. Such departments are usually located in the central or the largest offices of banks, there it is necessary to contact the debtor, here you can make an application for a deferred loan.
How to Confirm Your Insolvency?
As a rule, certain circumstances lead to the inability to pay the loan. If the borrower shows the bank what led to the difficulties, it will significantly increase the chances of obtaining a credit extension. Evidence should be documentary, for example:
- The birth certificate of the child;
- The certificate of death of a loved one;
- The labor with a note of dismissal/reduction;
- The sick leave sheet addressed to the borrower or his/her close person;
- The recipes for the purchase of expensive drugs;
- The documents on loss or damage to your own property.
The main thing is that such documents indirectly point out the worsening of the financial position of the borrower. In this case, even if the bank refuses to grant a deferral, a citizen can apply to the court. Of course, having received an official refusal from the bank. If you cannot bring any documents, you can still expect to receive a deferral. Be sure to contact the bank and tell us about your situation. Now more problematic contracts are becoming more and more, therefore the majority of banks prefer to seek compromises in matters relating to overdue debts.
What is a Credit Holiday?
The main option how to get a credit extension is to arrange a credit holiday in the bank. In theory, this is the name of the postponement of making monthly payments. The borrower does seem to be getting a vacation, he is temporarily relieved of the credit burden. The timing of the delay may be different, they depend on the specific circumstances of the borrower and the type of loan issued. Standard loan holidays are provided for a period of 3, 6 or 12 months. The larger the monthly payments, the more delay you can get. In fact, vacations can look different:
1. Full exemption from payments. This is an ideal option for the borrower. The bank allows the debtor to let, say, 6 monthly payments. The repayment of the loan seems to be paused. The borrower decides during the allotted period of its problems, and then continues to pay the debt without increasing the final overpayment.
2. Exemption from payment of principal debt. The monthly payment always consists of two parts: the amount of the principal debt and accrued interest. The bank can allow not to repay the main debt temporarily, but here you will have to pay interest. Of course, this will be less beneficial for the borrower, because overpayment will eventually become larger. But in any case, this is better than a spoiled credit history and huge fines for non-compliance with contractual obligations.
How will this influence your credit history? Granting a postponement will not affect your credit history, of course, provided that you timely contact the bank before the arrears are overdue. So, it’s also an excellent option to keep your reputation as a borrower.
When Will Your Debt Be Sold and How Much Will It Cost?
The bank sells credit debts only when it considers them to be hopeless. If the borrower makes any actions, periodically makes some sums on his credit account, conducts a constructive dialogue with the lender, then there is nothing to worry about. And the reason for this is one – the bank suffers huge losses, selling debts, and on the borrower, who at least pays something, you can earn much more.
In the pre-crisis period, the average age of delinquency in the contracts to be sold to reservoirs was about one year. With the onset of the crisis, the debts of citizens have grown significantly. The portfolio of overdue loan agreements of banks has increased significantly, so lenders are not in a hurry to sell, still hoping for a miracle. Now, in most cases, debts are sold in 2-3 years. These contracts can really be called hopeless, that’s why their creditors realize them.
The reason for this cheapness is the extremely low quality of such loans. If the bank sold the debt to the collectors 2-3 years after the formation of the debt, it means that it no longer hopes to repay the debt at all, so it is ready to receive a penny compensation. And collectors are also not ready to pay more, because the probability of returning such debts is negligible. But if the collector works for glory, then it can get an excellent profit. For example, if he/she bought a debt for 1.5% of its face value, and the borrower eventually agreed to a debt repayment of 50%.
Can the Bank Sell the Debt without the Knowledge of the Borrower?
Has your debt been sold to a collector? In theory, the bank does not even have to notify the debtor about this, the procedure is unilaterally. Not a bank but a collection agency will have the right to ask for the loan repayment.
The debtor can learn that the bank sold the loan, by simple registered letter. This will be an information message specifying the current recoverer and the amount of debt collected by him/her. A receipt will necessarily be attached to the letter to pay the debt, suddenly the debtor will get scared and run to pay the bills.
Do You Need to Be Afraid of Selling Your Debt?
Of course, as far as the debtor’s personal peace is concerned, it is diminishing. After a certain period of time, the debtor may think that his overdue debt has been written off for a long time, but then collectors insist on the return of credit debts. The debtor at this stage already has met collectors, when the bank hired them to collect debts, now all the circles of influence of the collectors will have to go through again. These are calls, visits, conversations with the debtor or relatives. If you consider that the collector bought a debt for a penny, then he/she will do everything possible to make a profit.
But do not start panicking, you can turn the situation into the right one for you. You can ensure that the collection agency writes off a large part of the debt. Moreover, the collectors themselves are ready to forgive the debtor an impressive part of the debt. You can really achieve that you will be charged up to 50% of the debt. As a rule, collectors first demand the entire amount of debt, but then they offer the debtor a “unique share.” For example, reducing the amount of debt by 50% if paid within a month.
Indeed, after participating in such a campaign, the debtor can say goodbye to his/her debt. And the collector, despite the impressive cut in the debt, will still be in the black. He/she bought the debt for 1.5% of its face value, and gained all 50%. This is beneficial to both parties, so it is worth pondering about the proposals that come from the new owners of your credit debt. The right of the bank to sell the debt in the near future will cause the debtors to become troubled again by the collectors. Now overdue debts are many and banks began to get rid of them massively. This means only one thing: if you forget about your responsibilities, soon collectors will remind you of its existence.
How to Behave in a Conversation with a Collector?
Prepare to be asked about your current financial situation, when you will start making payments. The collector will ask why you stopped paying the loan. He/she will behave very confidently, while the debtor is also encouraged to conduct a dialogue confidently, and is best legally shod.
At the very beginning of the conversation, ask the visitor to introduce himself, give his full name and the following information:
- which collection agency or bank he represents;
- on the basis of what document it is he/she or the agency works with the debtor.
This information can be useful to you in the future. By law, the collector is obliged to answer these questions. Be sure to write down all the answers so you do not forget the information. It is also desirable to conduct a voice recording of a conversation. Many phones support this function, so it’s not a problem. Warn the collector that the record is on. This will help you not to miss the necessary information, and the collector will behave more correctly, seeing that the record is being kept.
Make the conversation profitable for yourself. Ask as painless as possible for you to resolve the issue, ask about the possibility of debt restructuring. Do not immediately negatively treat the visit, it can be productive for you personally. At the end of the conversation, usually the collector gives the debtor a document specifying the amount of debt and requisites for its repayment. The citizen must sign the fact of delivery. But, in principle, if he does not want to sign anything, the collector can not do anything about it.
Unfortunately, when collectors came home, this does not always lead to a constructive dialogue. If the agency is engaged in collection, which work illegally, they can use threats and blackmail. Physical impact on debtors is almost never found. If the collector uses illegal methods, then you should immediately call the police. It is possible that by the time the police arrive collectors have already left your house, but you must always record the fact of illegal actions and write a statement.
You can and even should fight with the collectors! But this must be done in legal ways. Make sure that the law is not violated either by you or by the collectors. And do not forget to pay your debts on time. Believe, it’s better to agree with the bank or a payday lender on time than to fight off collector agencies.