Risks with loans – How should you manage the risks that exist around loans?
When you borrow money, especially through quick loans, you get money in hand today against the promise that you will repay the entire amount with the agreed interest in the future. This construction, of course, creates a financial risk. The risk is that sometime in the future you will not be able to pay interest and amortization. If this happens, one or more negative consequences may occur. Debt collection and payment remarks are just two examples. Taking a loan always puts a strain on the private economy, even if it is a small amount. This can cause far-reaching worries for your finances as delays and interest rates can make even smaller loans become considerably more expensive. If it is the question of a mortgage, car loan or other form of loan where you have provided something as collateral, another risk also arises if you would have trouble repaying the loan. Then the bank can step in and take what you left as collateral, which then corresponds to some or all of the amount you borrowed.
You probably understand that it is important that you make sure that a desired loan is included in your household budget before submitting an application. If you do not really know how to go about doing this, you can use our budget template to budget your finances and reduce the risks of getting into financial hardship.
There are different types of loans, but mainly loans with and loans without collateral. This means that in certain loan forms you need to provide a form of collateral to be able to take out the loan. The most common variant is for mortgages. Then you leave the home you are buying as collateral. What this means is that the bank receives a form of guarantee that they will get back the money they lend in the event that you cannot repay the loan amount. When you take out a car loan, you may even have to use the car you intend to buy as collateral.
Sometimes it may also be necessary to secure a security for larger private loans, even if you intend to use the loan amount for something that cannot be used as collateral. For example, if you want to renovate the bathroom, then for obvious reasons you cannot use the renovation as security. You may then need to use your existing home or vehicle as collateral for the bank to approve your loan application.
What happens if you can’t pay?
In Sweden, we have a statutory recovery process in several stages. The recovery process is designed in such a way that the debtor (the borrower) will have the chance to do the right thing for himself, while the creditor (the lender) will have some tools to use to force a payment. The recovery process is not entirely a process in the lender’s favor.
In short, the recovery process can be divided into three steps, namely:
- Reminders and debt collection claims
- Determination at enforcement authority
If you do not pay any repayments and interest under the loan agreement, you will sooner or later receive a reminder . In addition, in most cases you can expect to pay a reminder fee and also interest on late payment. If your payment does not arrive within the reminder deadline, the lender can forward the case to debt collection or send out a personal debt collection claim. However, most lenders use third parties for debt collection. This does not directly mean that you end up in enforcement authority’s register, but can affect your credit rating even before it leads to a payment note.
If you do not pay, despite the collection requirements , the lender or the debt collection company can send the case to enforcement authority. The chancellor’s first role is to inform you about the nature and size of the debt. If the case goes this far, it is important that you do your utmost to settle the debt as soon as possible, if not otherwise to avoid getting a payment note. You then also have the opportunity to appeal the debt if there is reason to do so in your opinion. However, this is a long and demanding process, which does not mean that you will get it right in the end.
This is calculated based on standard living expenses amount for your particular situation, and the excess part is used to pay off your debt. The chancellor can also decide on foreclosure of property, which means that they see if you have property that can be used to pay off the debt. It can be anything from TV, jewelry, home decor to vehicles and savings. Then a calculation is made on the value which is then deducted from your debt, after which the enforcement authority then sells the property through auctions under the auspices of the enforcement authority. If you find it difficult to pay off the debt, even though your assets are forfeited by the enforcement authority, you can be forced to go through something called debt restructuring. Debt settlement may sound like something positive, but it is anything but just that, even if one becomes debt free when debt restructuring is completed. However, the road there is long and difficult. Broadly speaking, debt restructuring is based on the fact that enforcement authority negotiates with the creditors a reduction of the current debt, then sets up a payment plan adapted to allow the debtor, ie the debtor, to live on a minimum of existence for a period in order to pay off the debt with everyone else. available funds. To put this into perspective, the minimum subsistence amount is approximately $4800 per month.
When do you get a payment note?
A payment note usually arises when a case concerning a debt that is due for payment comes in to the Corona Magistrate for determination. The case is then registered with enforcement authority and the information is made available to credit information companies such as Cream Lending, Fine Bank, and Binary Lender. The credit reporting companies add the current information as a note on mismanaged payment obligations.