Let’s speak honestly about bad funds

"Bad Credit score", "Venture Client" - We have often started to hear these thoughts these days. Thinking about it, it's well-established and genuine to talk about the issue of the outcomes in case of failure to pay back the borrowed funds.

Statistically, by May 2012, almost 25 percent of all loans made in the country are in the "bad" section - which means that the people for one reason or another can not service their credits.

Strategies to deal with bad credit

Banks, however, have some techniques to take care of bad loans, for example, by confiscating the proceeds, and if the individual has taken a mortgage loan - a forced sale of the pledged real estate. The methods appear to be and are restricted, however they don't aim to make banks and financial institutions rich but handle their credit risk. Another concern is that in most cases not paying the credit is unintended, and sometimes the borrower simply doesn't have the ability to settle the credit by the due date, or often times there are monetary difficulties, going out of the job, organization shocks, and so forth.

The tools of non-banking institutions are similar to those defined previously. Property is a common assurance mainly because we don't consider income and we tend not to try to find other guarantees and collaterals (such as personal accounts, etc.). A very crucial factor is that the potential risk that non-banking organizations assume is much over that of banking institutions because they work with people who, for some reasons, are unable to be funded by banks or require an extremely quick answer, respectively, represent a more severe "risk" for the lender. The real estate is the financial institution's assurance that in case of not paying the loan, they will be capable to take care of the loan risk, that is a lot higher than in the situation of banking institutions. This determines the much greater rate of interest.

What will happen in case the borrower is unable to meet the payment schedule:

From a formal view, legally, in the event you reach 6 unpaid installments, the financial institution has the right to declare the home available for purchase, for example. But no one on the market would like such a outcome. Before they get to the selling, they try to find alternatives to assist you to continue paying your credit:

• - a boost in the payout time period
• - bargaining periods when you only pay interest
• - and more.

The aim of banking institutions is not to obtain your home and to earn profits from the sale - on the other hand. From the sale we only get the "due", what's left remains for you. Nevertheless in order to obtain the due sum as quickly as possible, the house is sold at a cost under the market price. Besides this pushed sale, we would have many additional fees - financial and time. And last but not least - we're not a property agency and the forced selling of your property is a problem for us, not a trip.

That's why selling the house is the worst of all situation for both you and the lender. The best condition is to provide you a good credit with good rate, which you'll pay correctly and by the due date. From time to time, however, reality works out somewhere in the midpoint.

The banking companies realize that times are uncertain and that for the period of repayment of a credit, the situation may alter a lot - our buyer might lose his job, his business's income fall, and so forth. The financial institution will make an effort to do an open discussion with you - the clients - to reduce the "bad" loans. And in case that happens, they'll find a very good mutually valuable option.