Friday, 23 October, 2020

Working ways to get rid of debt – Consolidating of Loans

Microcrediting imposes a minimum of requirements for customers, but in return you have to pay a high price. Unlike a bank loan from 12–20% per annum, the percentage overpayment of MFIs is 300–700% in terms of a year. The funds are issued for a short period of time, and if the borrower does not have time to repay, they charge penalties that exceed the initial loan amount many times over.

Calls, letters of the creditor fall on the client who has made the delay, and the most incorrect will be an attempt to avoid communication. MFIs work closely with collectors, and in case of refusal to pay off, the client risks finding himself in the courtroom shortly thereafter, with a subsequent forced collection of debt, along with interest and accrued fines. Even a modest 1.5-2 thousand rubles in a couple of months turn into 8-9 thousand of debt to the MFI.

If there is a problem with non-payment of microloan, use the tips to resolve the situation. It is not worth letting the issue with debts to the MFI go on, as there is a real risk of bankruptcy if the conditions of the loan agreement are violated.


Make contact with the lender

Revise the budget

The worst mistake is to refuse to discuss the problem with the organization that issued the microloan. In the conversation, tell the reasons for the problem, as well as determine the period during which you agree to repay the debt. When a creditor searches for a debtor, he is worried, first of all, that the client does not turn out to be a fraudster and does not try to evade obligations.


Use deferment

When it becomes apparent that the debt will not be repaid on time due to financial difficulties, discuss with the MFI the option of granting a credit vacation. Many organizations, seeing the impossibility of receiving the amount immediately, go towards the client, offering to delay payment and determining the repayment schedule. It is more profitable than to search for the debtor and try to influence through the court and bailiffs.

Sometimes the deferral only covers the payment of principal, sometimes the MFI allows for a temporary interruption of payments for 1-3 months. The option of a partial deferral is primarily beneficial to the lender, however, the borrower gets a short break to find a solution to financial difficulties, since the payment becomes less. Taking advantage of credit holidays, the client does not spoil his nerves and maintains a reputation in the CII, since debt restructuring was agreed with the lender.


Do not refuse to pay

Do not refuse to pay

The absence of an amount sufficient for payment is not a reason to completely refuse to pay. Make any possible amount, as the lender will convince your intentions to repay the debt when the financial situation improves. It is difficult to collect 10-15 thousand rubles, but even 100 rubles credited to the account will show the lender that the borrower does not refuse the debt.


Revise the budget

The well-known formula of the family budget is presented in the form of a 50–30–20 proportion:

  • half of the income is directed to the current payments of the family, without which it is indispensable (this includes the obligation to pay the loan);
  • 30% of the budget is spent on personal desires, entertainment (when there is a question of possible bankruptcy and seizure of property, entertainment expenses or additional purchases are hardly appropriate);
  • 20% go into savings, which the family then invests in investments, or the formation of the NZ (when debt to the MFI was formed, increasing daily in a geometric progression, it is time for the time to abandon savings, using the NZ to liquidate the debt on microloans).

Given the seriousness of the situation, review the cost items at a time until the MFI’s financial requirements are settled. Use reserves to avoid interest overpayment losses.


Apply for refinancing

Apply for refinancing

Many financial institutions offer clients a refinancing program aimed at paying off current liabilities through on-lending through a new lender. Examine the offers of several banks and discuss the possibility of refinancing a microloan. It is better to pay the bank within 20-25% of the overpayment than to pay the last in payment of 600-800% per annum.

Use any opportunity to reduce interest in the bank. Take advantage of pledge guarantees, issue guarantors.


Do not take new loans to close previous ones

If you are unable to repay a small debt in an MFI in a timely manner, you should not expect that it will be easier to cope with 2 loans. When a new credit line is opened, it is tempting to spend the amount provided, not on repaying an unprofitable microloan, but on other needs and wants.

Instead of a new loan, look for target refinancing programs. Still, it is more profitable than a conventional loan, and banks, in an effort to get a client of another lender, are ready to provide a low rate and transfer the amount of the debt to an account in the MFI. It remains only to control the process of cashless repayment.


Time to search for new ways to make money

Do not take new loans to close previous ones

When a person often resorts to loans, most likely, his expenses do not correspond to the available income. The problem with non-payment of debt in the MFI clearly shows the urgent need to increase revenue. Consider options for completing a part-time job, opening up alternative sources of income, turn a hobby into a profitable business. Perhaps the situation is resolved even simpler: it’s just time to talk with the management about the well-deserved increase, if not in the career, then in wages.

Overdue debt in the MFI quickly and inevitably leads to the formation of bad debts, if you do not connect to the repayment process in time and do not control every penny in the budget. A microloan, allowing you to lend a certain amount at any time of the day, takes too expensive, and the conditions resemble bonded ones. Remember that you still have to get out of debt. And if you shy away from finding a solution to the problem today, tomorrow the payment will be much greater.

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