There are many ways that banks are trying to protect themselves from problem loans: checking income, place of work, age of the borrower, careful study of credit history, etc. However, what are these problem loans? And how do they threaten the debtor and the bank?
A problem loan is a loan that the borrower cannot repay. Such borrowers often take out several loans without taking into account their own financial capabilities, and as a result, it is already problematic for them to pay off obligations at least in part of the debts they have taken.
For banks, this problem is even more serious. First, they lose the profit they expected to receive from the loan, as a result of which they have to withdraw money from reserves in order to pay off deposits, etc. Secondly, in order to receive the funds issued to the borrower, banks have to invest money again: paying employees who work with debtors is spent on measures such as litigation or seizure of the borrower's property. And all this, again, takes time.
And if the bank somehow still manages to force the negligent borrower to pay the loan, it will transfer almost all the costs to the debtor. But if the borrower is unable to make regular payments, the bank will definitely incur losses that it will not be able to compensate in any way.
Therefore, banks are trying not only to check in advance the future borrower, but also to act as soon as possible if the loan payment has not been received in due time. In this case, the following measures are applied to the debtor (sometimes a delay of one day is enough):
- calls with a reminder to pay;
- letters with the requirement to comply with the terms of the loan agreement;
- letters with a reminder about penalties for late payments;
- a proposal to early terminate the loan agreement with the payment of the entire amount by the borrower at once.
However, a day-overdue loan is not problematic. It will be considered as such only when the non-payment period reaches 90 days, during which the debtor did not make a single payment. Although this is only one of the signs of which a problem loan has several:
- delays in regular payments without justification;
- lack of financial statements from the borrower or refusal to provide them;
- long absence of communication with the borrower;
- change of direction of activity.
The bank solves this kind of problem in several ways:
- Revision of the loan agreement in order to change the interest rate and the amount of the regular payment. Or changing the status of the debt to current instead of overdue (banks take this measure, most often when they want to maintain cooperation with the borrower).
- Termination of a loan agreement, which was concluded on the basis of a pledge. And at the same time, the bank sells part of the debtor's assets to repay the loan, and the borrower himself does it voluntarily.
- Sale of collateral. And in this case, all relations between the borrower and the bank are interrupted, since the measure is quite radical.
And in cases where the debtor does not react at all to the bank's demands and does not make contact, or even tries to hide from obligations, his debt is transferred to third parties - collection agencies. Their methods involve the same psychological and social impact on the borrower as the bank, but the collectors are much more persistent and radical. As a result, the debtor, more often than not, gives up and agrees to pay off the problem loan.
