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Nonperforming loan: Meaning and explanation

How do you define a bad loan.

How do you define a bad loan.

When a consumer needs to take out a loan, he undertakes at the same time to repay the amount of money loaned to him by the credit institution or by the financial institution. In other words, it will have to refund the amount (plus a fixed or variable interest rate), by paying the installments in pre-established deadlines.
However, it can happen for various reasons (economic difficulty, personal and family problems, loss of job, etc.) that the consumer is unable to repay the loan according to the agreed methods and that the loan is classified by the bank as a ” loan. in suffering “. This definition therefore means a loan that is difficult (or almost impossible) to be collected by the credit institution due to the debtor’s insolvency.

But is a single unpaid installment enough for a loan to be defined as bad debts? Obviously not. In order for the credit institution to categorize a loan as bad, certain situations must have occurred previously, as we will try to illustrate in the next paragraph. The consequences of the debtor in the case of bad loans will also be briefly presented below.

How can you get to a bad loan.

How can you get to a bad loan.

In the event that a debtor is unable to pay one or more installments of the loan (or begins to pay late), he will be contacted by the bank or finance company to investigate the reasons for the non-payment. If it emerges that the consumer is in a momentary situation of economic unavailability, a term will be agreed (usually between 10 and 14 months) in which the debtor will have to regularize the situation (then pay the arrears installments and resume carrying out the subsequent payments on time). In this case we speak of “bank watchlist”, or as emerges from the term, a temporary situation of illiquidity but which could still be resolved in medium-short times.

If, however, the consumer is unable to settle payments on schedule, the lender can classify the loan as one of bad loans. In order to arrive at this stage, therefore, a proven situation of insolvency on the part of the consumer is necessary, who is probably unable to return the money lent to him. The main difference between substandard and non-performing is in fact found with regard to the persistence of the debtor’s default. While in the case of substandard the situation is serious but it could still be temporary and reversible, when the debtor’s condition of insolvency is passed on it is assessed as permanent by the credit institution.

Consequences for the debtor deriving from having a bad loan.

Consequences for the debtor deriving from having a bad loan.

If a bank or a financial company catalogs a credit as bad debts, they must send the debtor written communication by registered mail, where it is required to return all the sums lent within a maximum time of 15 days. If this does not happen, the credit institution can proceed with an injunction, that is, it will attempt to recover the money through legal channels. In addition, the debtor’s situation will be reported to the Central Credit Register (a system that contains information on customer debt, which can be consulted by all intermediaries). The report effectively prevents the consumer from being able to ask for credit from other banks or financial institutions, as it is a “bad payer”.

Clearly, once the debt has been fully paid, the cancellation of the bad position from the Central Credit Register will be possible.
It is important to underline that if a debtor believes that the bank or the financial company has cataloged his loan among the bad loans too quickly (not having given him the opportunity to remedy what was only a situation of momentary illiquidity), he can appeal to the court and a judge will decide on that.

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Loan Refused By The Bank, The Most Frequent Reasons

Loan refused by the bank: because the bank does not accept the application

Loan refused by the bank: because the bank does not accept the application

A loan refused by the bank represents not only a disappointment, but also a problem for crediting access. The refusal of a loan in fact lengthens the time for submitting a new loan application. In fact, we remind you that requests for refused loans are charged to the applicant for a month. Period during which you will therefore not be able to obtain credit from another bank.

To properly address the problem, however, it is necessary to understand why the request was rejected. In fact, the reasons for a refusal are not always clear, although the reasons are usually related to the customer’s repayment capacity.

How to solve credit access problems

How to solve credit access problems

For greater clarity, however, we can distinguish the main causes of the refused financing in two categories: current economic problems and problems with past loans.

If a loan is refused due to the economic condition of the subject, it means that the bank does not consider the applicant’s income sufficient to guarantee the repayment of the periodic installment.

Instead, the question is different for those who have had problems with the repayment of a past loan. In this case, in fact, we are talking about applicants with a bad credit history, or of subjects who have not been able to regularly repay the amortization installments.

However, it is necessary to remember that even those who have had problems with a past loan will be able to easily access credit, provided that they can count on a fixed income. In fact, employees and retirees can obtain a loan thanks to the transfer of the fifth. Financing accessible also to those who have had difficulty with the repayment of a past loan.

When, on the other hand, the problem is job insecurity, other guarantees must be presented to obtain financing. The most accepted is undoubtedly represented by the signature of a guarantor. Person who undertakes to repay the amortization installments in case of non-payment by the beneficiary.

Applying for loans through capital lender is easy. An online loan application is sufficient to address both banks and private investors at a serious level. Of course, the borrower decides who gets the loan.

Our customer support team is fast and efficient to clear all your doubts regarding personal loan eligibility, procedures, offers, documentation and repayment options. We even contact with the respective lender on behalf of you.