If a loan can no longer be repaid, you can quickly find yourself in a precarious and uncomfortable situation.
Taking out a loan is no longer a problem for many people. It is also common for several loans to be taken out, perhaps not at the same time, but in quick succession after the first has been paid off. In most cases, taking out a loan again is not a problem. However, taking out a loan has to be well calculated and you have to consider which monthly installments you can afford so that not only the corresponding loan repayment but also the accruing interest can be paid What however, happens when the rates become unaffordable at some point? For this, a distinction must be made between the various reasons why the loan can no longer be repaid.
Loan no longer repayable due to employment
If the reason is, for example, work-related, this misery is not yet such a big problem. If the employer does not always pay on time, you still know that you will receive it and that you can repay the loan. If the employer finds himself in a state of insolvency, the employee can still receive his salary. Such cases are less dramatic and what you should do in such a situation is to speak to the bank. The bank usually grants a postponement of payment and if the situation is explained to the bank early enough, there should actually be no problem. Another option is to lower the monthly repayment installments in order not to burden your budget quite as much.
Worst case: garnishment
In situations in which you can no longer pay the loan installments for repayment, it is important that you contact your lender as early as possible. Failure to do so can result in a nasty surprise if the monthly installments simply fail to materialize. Such a nasty surprise would be, for example, that the loan can be canceled and due immediately.
The next step, if the loan has already been canceled and the due date has already been given, as well as that written reminders from the lender have remained unsuccessful – now a warning notice can come, which can be followed by an enforcement notice at short intervals. If the borrower is no longer able to seize valuables, the account or wages will be seized. Through this, the bank receives partial payments, which also repay the loan.
What happens with a real estate loan?
This is common for a normal loan when the monthly installments can no longer be paid by the borrower. Another case is if the loan is a loan for a property. If there is no repayment rate on the real estate loan, foreclosure is the usual way for the lender to get the borrowed money. If there is a compulsory auction, the house is evaluated and the bank then sets a minimum bid. Then the house is released for auction and goes to the highest bidder.
If the bank’s maximum bid is too low, it may well be that further auction dates will be set. The proceeds from the auction are then used to repay the former loan, but this cannot be repaid in full. The remaining amount must then be repaid by the former borrower, even though the house for which the loan was originally intended is no longer there.