Lending services in Ukraine are becoming increasingly popular. Some take out microloans a few days before their paycheck, while others take out full-fledged consumer loans for vital purchases. Agree, loans are a great help when you want to buy appliances, furniture, household goods, cosmetics, real estate, open a business, pay for a tourist trip or medical services, but you don't have enough money on hand. It is obvious that loans are beneficial to both parties - both lenders and borrowers. If the loan is repaid on time, the borrower's trust in them increases, and next time they may be given money for a larger amount and for a longer period. But, unfortunately, financial obligations are not always fulfilled on time.
Therefore, it is necessary to understand what will happen if the loan is not paid on time? What consequences await the borrower in case of non-repayment of the debt? What are the options for solving the problem with the loan? What to do if the debt is very large? Is there criminal liability for non-payment of loans? All this is discussed further in the article.
Reasons for late loan payments
When a borrower applies for a loan from a bank or microcredit institution, he undertakes to repay the loan with all interest within the period specified in the agreement. However, sooner or later in life, situations arise in which timely repayment of the loan becomes impossible. Most often, a valid reason for terminating the loan payment can be personal circumstances that have arisen unexpectedly. This may be the loss of benefits, work, illness of the borrower or one of his close relatives, disability, a decrease in earnings and any cash receipts, divorce, death of family members, conscription, an emergency, a natural disaster, a car breakdown, the need for urgent home repairs and other unforeseen expenses. Another reason may be sudden changes in the economy - inflation, changes in currency exchange rates, prices for goods and services, and wage levels.
In addition, problems with payments can arise due to banal irresponsibility, low financial literacy, incorrect financial planning. Some even deliberately evade payments, but they do not yet fully understand the consequences. Also, the reason for non-payment of the loan can be any addictions, such as gambling, alcoholism and other bad habits - all of them lead to a protracted debt hole, from which it is not easy to get out.
Consequences of non-payment of a loan
It is necessary to understand that most unforeseen circumstances do not exempt the debtor from the obligation to repay loans and interest on them. And so, it is still necessary to repay loans at the bank or loans at the MFI. The credit organization is generally not interested in what unpleasant life and financial circumstances may occur in the life of the borrower. The most convenient thing for them is to get their money back with interest. Let's consider in more detail what threatens borrowers for systematic delays in loan repayment.
Text notifications and phone calls
In the first days of the delay, the borrower will be sent SMS messages in personal messages and a mobile application with a reminder to make a payment as soon as possible and why timely payment of debts is important for the client's reputation. Then the manager starts calling the debtor in order to agree on payment and name the approximate date of payment of the debt. It is worth adding that currently the collection department of the financial institution can bother the debtor from 9 a.m. to 7 p.m. No more than two calls per day are allowed. At the same time, if creditors call at night, this is a reason for a complaint.
Accrual of fines and penalties
In the first days of delay, the creditor is unlikely to file a lawsuit, but may impose a penalty. Penalties for non-payment can be of two types:
- fine – a clear amount charged for violating the terms of a credit agreement;
- penalty – a percentage of the total amount for each day of delay.
The amount of debt collection is always specified in the loan agreement, which is signed by both parties. Initially, penalties can be 1–2% of the amount of delay, then increase to 2–5%. After 60 days, fines and penalties can reach 10% of the amount of debt. The amount of fines and penalties is determined by each lender individually and depends on the number of violations and the amount of debt.
Deterioration of credit history
Credit history is a kind of “financial portfolio” of a person, which is used to assess the borrower’s solvency. In other words, it is a kind of dossier that indicates the person’s entire credit history: where, when, for what amount and for what term loans were issued, all systematic violations of the terms of contracts, early repayments. It is worth noting that even a slight delay in payment negatively affects the credit history and credit rating. And this, in turn, can reduce trust in the borrower and prevent him from counting on borrowed funds in microfinance organizations and Ukrainian banks in the future. And restoring CI and KR is quite difficult nowadays. Therefore, try to respond to financial difficulties in a timely manner, do not hide from bank or MFI employees and look for peaceful ways to negotiate with the lender for an overdue loan.
It is important to remember that all records of closed loans are stored in the BCI for up to 10 years. All outstanding debts are indefinitely. Accordingly, even after many years, the credit history will not be cleared of negativity by itself. Therefore, if you have to use credit funds often, it is better to immediately start improving your CI to correct it and have a better chance of getting an online loan in the future.
Selling debt to collectors
If the debtor does not make payments on the loan for more than 3 months, the financial institution will most likely transfer the case to collection companies. Employees of such organizations work on the same principle as the bank, but they try to use more aggressive manipulations and harsh methods in order to return at least part of the debt. Collectors call, write, put psychological pressure on the debtor, his relatives, colleagues and acquaintances, threaten, make photo collages, sometimes they can come to the house.
It should be noted that such actions of collectors are not considered legal and can be appealed in court. Therefore, it is important to know your rights and respond correctly to the actions of the secondary creditor. Be sure to ask on what basis the debt is being demanded and ask to send official documents on the transfer of the debt. In the case of aggressive and constant threats, say that you have a recording of the conversations and plan to contact law enforcement agencies and file a complaint with the National Bank of Ukraine. We also recommend contacting a good lawyer to check the legality of the penalties and find out whether part of the penalty can be written off in court.
Lawsuits and seizure of property
If the debtor has been unwilling to find money and pay for more than six months, the creditor proceeds to more decisive measures and may file a lawsuit, and the debt will be forcibly collected through the enforcement service. Bank accounts may be seized, and the funds will be directed to repay the debt. As a result, up to 20% will be taken from the official income every month.
The borrower's property may also be sold if the loan was secured by a car, apartment, house, or other valuables. Therefore, it will be more profitable for the debtor to agree on the repayment of the loan and fulfill the obligation independently.
It is worth understanding that in court proceedings, the financial organization will sooner or later receive its funds. But it is desirable to avoid such a situation.
How to protect yourself when applying for a loan and avoid negative consequences?
In order not to suffer from the negative consequences of a credit loan, it is important to correctly assess your financial capabilities and responsibly approach credit obligations. First of all, we recommend that you apply for loans with the most favorable terms in advance. To do this, evaluate the offers of various banks and microfinance organizations, and choose those that suit you on the terms.
In addition, do not rush to sign the contract without reading it. Before signing, carefully study the content of the documents, familiarize yourself with the size of the commissions, the annual interest rate, the consequences of non-payment, do not be afraid to ask questions to the manager of the financial institution. Try to avoid loans with hidden fees and excessive penalties, otherwise the loan will become a burden in the long term.
It would also be a good idea to analyze your solvency in detail. It is worth making sure in advance that the total amount of all loan payments will not exceed 30-40% of your monthly income. Think about whether you will be able to repay the debt in the event of job loss, illness, or other unforeseen situation.
In addition, you should not take out a loan without an urgent need, especially in MFIs, where you often have to pay crazy interest rates. We do not recommend taking out new loans to repay old loans - this will significantly complicate your situation.
And of course, we recommend always keeping the loan agreement and all settlement documents (receipts, checks) for 3 years. This will help avoid disputes with the financial institution.
What to do when you have a large debt?
There are several options to resolve the debt issue:
Prologue. This is an agreement between the client and the lender to extend the term of use of credit funds. The service may be provided free of charge or for a fee.
Restructuring. The service involves changing the terms of the loan and is in most cases available to those clients who have previously been responsible for paying off the loan. Depending on the request of the defendant, the bank may reduce the interest rate, change the repayment schedule, extend the loan term, or provide a deferral until a certain date.
Refinancing. Essentially, this is a request for a new loan to pay off a problem debt. This service will help reduce your credit burden and get more favorable terms.
Credit holidays. This is a period when the borrower can postpone payments without worrying about penalties or worsening of their credit history. Keep in mind that each financial institution has its own terms and conditions for credit holidays and not every borrower is eligible for them.
Bankruptcy. As a last resort, you can try to declare yourself bankrupt. This is a long and complicated legal process that requires the help of qualified specialists. Keep in mind that this is only possible if you have a debt of more than 180 thousand UAH (30 minimum wages).
Frequently asked questions
– Can fines be reduced after non-payment?
Try to ask the creditor for a partial or full write-off of penalties and fines. Be sure to justify your situation and tell us about the reasons for late payment. If you are ready to pay the main part of the debt, banks may make concessions. In addition, it is worth reading the loan agreement to check the legality of the penalties. Sometimes banks and MFIs intentionally overestimate penalties and fines, which may not be specified in the agreement and contradict the legislation of Ukraine. You can try to appeal them through the court to reduce the amount of the debt. In this case, you should contact a qualified lawyer so that everything goes as it should.
– How long can you not pay on a loan without legal consequences?
The bank is unlikely to file a lawsuit if the delay period is 2-4 weeks. Based on judicial practice, financial institutions begin to go to court after 6-7 months of the debtor's delay. Some may negotiate voluntary repayment for 1-2 years, and only then go to court. Here everything depends on the internal policy of the creditor, the circumstances of the debtor and the amount of debt.
– What to do if high fines are charged?
It is worth understanding that the maximum amount of penalties accrued for violating the terms of the loan agreement cannot exceed twice the amount of the loan funds received. For example, if the borrower was loaned for the amount of 4,000 UAH, he may receive fines and penalties for the amount of up to 8,000 UAH, no more. Therefore, if the lender does not comply with this rule, this can be appealed in court. To resolve this issue, contact a qualified credit lawyer.
– What should I do if I cannot repay the entire loan debt?
It is worth not hiding from the creditor, but immediately go to negotiations. Look for legal and peaceful ways to settle the debt. You can try to agree on changes to the terms of the loan agreement (restructuring, prolongation, deferral of payments, etc.). But if the case has reached court, it is important to participate in the process and defend yourself with a good lawyer.
– Is it possible not to pay the loan?
Unambiguous - no. The debt will have to be returned in any case. Evading payment does not solve the problem at all, and the consequences of non-payment are inevitable. Therefore, if you have the opportunity to pay the loan, it is better to do so. The only case when you can not pay a loan or credit is the statute of limitations. And even then, it is not possible in all cases.
– What is the statute of limitations?
This is the period established by law during which the creditor has the right to demand the full amount of the debt from the debtor. Currently, it is 3 years. Therefore, if the financial institution does not go to court within this period, the debt is written off.
– Is there criminal liability for non-payment of a loan?
Often, creditors and collectors threaten this. But currently, Ukrainian legislation does not provide for criminal liability for evasion of loan payment. This applies to cases where the delay occurred due to unforeseen circumstances (serious illness, loss of job, property, war, etc.). It is worth understanding that punishment is possible only in the case of fraud by the defendant, and if this was proven in court. For example, a person could have used false income certificates or forged documents when applying for a loan. The punishment in this case involves a fine of a significant amount or imprisonment for several years.
Final thoughts
Overdue loans are a rather unpleasant situation that can happen to any of us. This is not a sentence and you should definitely not be ashamed of it. The main thing is not to ignore the problem, but to immediately notify the lender as soon as difficulties with payment arise - many financial institutions may make concessions. If the lender does not want to comply - consult a credit lawyer. A specialist will tell you what is the right thing to do in your situation, how to avoid additional penalties and maintain your credit reputation, and will help you get preferential terms for repaying the debt. In addition, you should not ignore court decisions or take out new loans to repay old debts - this will significantly worsen the situation and lead to a more difficult financial hole.
