Most borrowers and loan seekers in Germany naturally assume that they will properly repay the loan they have taken out. Only a small percentage of those who borrow money do so on the assumption that they are unlikely to be able to repay the loan amount anyway.
Even though most borrowers act with good will to pay the loan installments as agreed, problems can still arise due to a variety of reasons. In the following guide we would like to inform you which causes are often found in practice and what you can do or. what happens if you can no longer pay your credit.
Which reasons often lead to payment problems?
Ideally, at the time of taking out the loan, you should have a disposable income at least equal to the loan rate agreed with the bank. If this is not the case, there is already a gross error at this point, because then it is purely mathematically not feasible to pay the loan installment in the agreed amount.
- Small loans up to 3000 euros
- Vexcash helps with short-term bottlenecks
- Even with a low credit rating
- Credit request has no influence on your Schufa score!
We assume at this point that your disposable income was sufficient at the time you took out the loan. Nevertheless, it may subsequently happen that either the expenses increase or your income is completely or partially eliminated.
The most common causes, which can therefore also lead to difficulties in paying the loan installment, are:
- longer incapacity to work (more than six weeks)
- Occupational disability
- Unemployment
- unforeseen expenses, for example car repairs
- divorce
- unforeseen expenses in the health sector
All these causes can lead to the fact that you suddenly have significantly higher expenses or your income is reduced or. Dropped. This, in turn, often results in the fact that the loan installment, which was still well bearable and thus agreed upon at the time of the conclusion of the loan agreement, can no longer be paid. Although such a situation is extremely unpleasant, nevertheless, in practice there is usually a possibility that it does not have to come to a complete credit default.
Loan installment can no longer be paid – and now?
If you find that you can no longer pay the loan installment agreed with the bank, you should seek contact with the lender as soon as possible . Of course, the bank will also approach you on its own initiative, namely at the latest when you have not paid several loan instalments as agreed. However, there is no need for such an unpleasant discussion if you take the initiative yourself. Even if this is an unpleasant conversation for you, we assure you that this happens much more often than you think. It should not be inconvenient for you. If you simply wait, the bank may start processes that you can no longer stop. An immediate conversation helps here. Banks have exactly for this case that you can no longer pay your loan installed possibilities to help you.
Depending on the situation, there are basically the following measures that you can take in cooperation with the bank to prevent a complete loan default:
- deferment of loan installments (usually a maximum of one year)
- Reduction of the loan installment
- Waiver of partial debt by the bank
The most frequently chosen and initially also most practicable way is certainly to reduce the agreed loan installment. This in turn makes an extension of the term necessary, in which most banks, however, see no problem. Prerequisite is, however, that you have only temporary payment difficulties and it is foreseeable that you can at least pay the then reduced loan installment as scheduled until the end of the loan term. Of course, all measures always require the consent of the respective lender.
Should the reduction of loan installments or even deferment for six or. If the period of twelve months is not sufficient, in some cases there is also the possibility that the lender waives part of its claims. This measure is by no means as unusual as it may seem at first glance. Although you will probably think at this point that hardly any bank will voluntarily waive its claim. Practice shows, however, that lenders are not infrequently willing to drop at least a part of the claims. This is quite simple to justify, because of course the lender prefers to get back at least part of the money lent, than not being able to book any repayment at all in the end, because the borrower might file for personal bankruptcy.
Failure to reach an agreement with the bank: What happens now?
In the previous section we informed you about what you can do yourself to prevent the worst in case you can no longer pay your loan installments. Of course, in practice, there are also cases when no agreement can be reached between the borrower and the lender. This is especially with higher loan amounts more often the case, for example, in the course of real estate financing. So, if the bank should insist on paying the loan installment or. insist on the entire debt, there are various measures that the lender can take.
- Small loans up to 3000 euros
- Vexcash helps with short-term bottlenecks
- Even with a low credit rating
- Credit request does not affect your Schufa score!
First of all, the bank will set you a deadline within which you have to pay the outstanding debts or. have to pay the installments as agreed. This is mostly 3 months. If this does not happen, dunning and collection proceedings are usually initiated. The credit agreement may then be terminated for you and the entire credit agreement becomes due. In this context, the bank as creditor can of course take all legal measures, which can ultimately lead not only to a default summons, but all the way to an affidavit, a writ of execution or, in worse cases, even the opening of personal insolvency proceedings. However, the situation is somewhat more positive if the loan was not a blank loan but a secured loan. In this case, after a certain period of time, the lender has the right to liquidate the loan collateral provided.
This happens, for example, if you provided any of the following loan collateral when you signed the loan agreement:
- Pledging of securities
- Pledging of savings
- Assignment of claims
- Guarantee
- Transfer of ownership of vehicle
- Land charge / mortgage
So, after the expiration of the set deadlines, the bank, as a creditor, also in terms of the loan collateral provided, has the right to liquidate this collateral at any time. This could be, for example, that an endowment life insurance policy assigned to the lender is cancelled by the bank, so that the surrender value is paid out by the insurer. Of course, if this is not sufficient to cover outstanding debts, the lender can continue to pursue the usual legal dunning process for the difference afterwards.
Conclusion: Take the initiative and examine possible solutions
First of all, it is important that you find out as soon as possible in the first place if you can no longer pay your loan. Once this is done, the way forward should be to look for feasible solutions. One solution may be that you reduce (unnecessary) expenses, so that the loan rate may already thereby become sustainable again. If this is not the case, but the payment difficulties are only temporary, you should agree with the bank on a reduction of the installment or deferment of the loan installment if possible. In any case, it is important to talk to the bank immediately and not to wait until you receive a demand for payment or even an order to pay. If you feel overwhelmed with the situation, it is of course possible to seek professional help from a debt counselor. This talks among other things with the lender and any other creditors and can in practice often help to save the situation and reach an agreement.