Problems with timely repayment of loans is something that affects a huge number of people, often not even through their fault. The death of a loved one, dismissal, illness or accident are events that can easily lead to a dramatic deterioration of our financial situation, especially if we do not have big savings. The question therefore arises: if we have received the termination of the loan agreement by the bank, what should we do next? What consequences can we expect and can we defend ourselves against such a bank’s decision?
Termination of the loan agreement – what could be the reason?
The bank may terminate the loan agreement only in strictly defined cases. This is possible if:
- the customer does not pay the debt on time,
- the debtor’s creditworthiness has significantly decreased,
- the customer misled the bank (for example, it provided a false amount of income or expenses),
- the value of the loan collateral has decreased (for example, the value of mortgaged property has decreased),
- funds from the loan were used contrary to its purpose (in the case of special purpose loans).
The termination of the loan agreement is not, contrary to appearances, the bank’s first instinct. Usually, this institution tries to contact unreliable customers first and for some time only reminds them of the need to make a payment, and only then takes radical steps.
A very popular practice among banks is to send conditional loan termination, ie a document stating that if the borrower fails to repay the debt within a specified period, the loan agreement will be terminated.
The bank may terminate any type of loan agreement, including:
Termination of the contract is the same for all types of loans.
Termination of the loan agreement by the bank – what next?
I was unable to pay my debt back on time, I received a letter of termination by the bank – what should I do next? Unfortunately, the consequences are really severe when it comes to the termination of the loan agreement.
After the termination of the contract by the bank, a notice period of 30 days will apply. However, it may be longer if the bank uses other procedures in this respect. The exception is a situation in which the creditor expects that the customer may file for bankruptcy of consumers – in this case the notice period may be 7 days.
The notice period is the time that the debtor has to pay off the entire debt. For obvious reasons, this will not be possible in many cases, especially when it comes to, for example, a mortgage. It is unlikely that a debtor who is unable to pay several installments could cope with paying off the whole debt in such a short time.
Further consequences of terminating the loan agreement
What happens if we can’t afford to pay all the debt and the notice period expires? The bank will probably involve a debt collection company or assign debt. If this also does not lead to recovery, the case will probably go to court, followed by bailiff enforcement.
When the bailiff enters the case, it will be difficult to negotiate and resolve the matter in our way. Therefore, it is worth contacting the debt collector as soon as possible and try to reach an agreement instead of avoiding his calls and letters. If we take the initiative, there is a chance that the debt can be divided into installments and repaid as far as possible. In the latter case, we can almost be sure that sooner or later the creditor will lose patience and decide to solve the case in court.