What happens if I dont pay a loan?
When a personal loan is requested, it is done with the intention and conviction that we can assume that debt. However, there are moments in life when there are setbacks, such as dismissal, illness, separation or an unexpected expense, which can destabilize the family budget, preventing us from coping with the monthly payment of the corresponding fee.
When we stop complying with the regular payment of our personal loan, it is normal for the financial institution with which we have hired us to send us a notice either by phone, postal mail or email. What can we do if this situation presents itself and we cannot cope with the debt?
What does it mean to have a personal loan?
Article 1740 of the Spanish Civil Code (CC) defines “loan” as a contract whereby “one of the parties delivers a fungible good to another to enjoy it for a certain time and once this period is over, return it to its previous owner ». In addition, article 1753 establishes that “he who receives a loan, money or another fungible thing, acquires his property, and is obliged to return to the creditor something of the same kind and quality.”
That is to say, a personal loan is a contract in which the financial or banking entity will advance an amount of money to us, with the obligation that we repay it within a certain period of time, with previously agreed interests and expenses.
In addition, this type of loan, as its name implies, requires a personal guarantee. This means that the loan holder offers as guarantee all his present and future assets. In the same way, if a guarantee is presented, the guarantor assumes the risk of jointly taking care of the debts.
When do you prescribe a personal loan debt?
The first thing that we have to take into account is that when we commit to request and be the holders of a personal loan, we must be sure that we have sufficient financial capacity to pay it.
However, in the event of any setback, we must also be aware that no debt is eternal, all have a statute of limitations unless there is a judicial resolution that indicates otherwise. As a general rule, people who incur a debt tend to think that their indebtedness prevails until the total amount they have borrowed is paid off, in addition to interest.
The truth, however, is that, in Spain, debts are not eternal, but are limited by Law 42/2015, of October 5, of reform of Law 1/2000, of January 7, of Prosecution Civil (SP / LEG / 18525), which establishes a maximum period of five years for the termination of debts without a specified specific period.
But then, when do you prescribe a personal loan debt? In the case of the personal loan, the debt is also extinguished after five years, both of interest and of the principal amount. This rule also applies to any non-mortgage loan, including credit card debts. In the case of mortgage loans, the debt prescribes at twenty years.
Can you garnish me for a personal loan?
Before applying for a loan, it is important to ask yourself a series of questions: Do I have a healthy economy? Do I have enough income to face the monthly fee? Do I need someone to guarantee me? Can I be seized for a personal loan?
Placing ourselves in each of these scenarios will help us not find ourselves in an unwanted situation in the future. Before the first installment that we stop paying the financial entity will begin to apply late payment interests, the amount of which is higher than that of ordinary interests.
These will gradually accumulate to the initial debt so that it will continue to grow month by month and each time we will owe a higher amount of money. If this situation continues over time (usually between three and six months), the financial institution will finally initiate a claim through court.
As we have seen in previous lines, a personal loan requires a guarantee of all our present and future assets. So if we can not assume the payment and the claim goes to the judicial field, most likely we will be seized all the assets that are in our name.
What can you seize if you don’t pay a personal loan?
Next, we will see what you can be seized if you do not pay a personal loan. The most common is to start with bank accounts and payroll. But if the amount we owe is very high, the court ruling can go through seizing the house, the car, the pension, etc. In short, any good necessary to settle the debt.
In addition, if to grant us the loan it was necessary that another person endorse us, the judge may decide to seize, in turn, the assets of this person, since he has acquired joint and several liabilities for the debt.
Finally, do not forget that not paying a loan also means that your data is recorded in the files of delinquents such as RAI (Registry of Unpaid Acceptances) or the ASNEF (National Association of Financial Credit Institutions). This will make it difficult or even impossible for you to obtain financing in the future from a financial institution.
Can you seize my house for a personal loan?
Although generally, when this type of loan is requested, no real or mortgage guarantee is provided, we are implicitly endorsing this debt with the totality of our present and future assets. So when faced with the question: can my house be seized for a personal loan? The answer is yes, if the judge considers it necessary, depending on how high the amount we owe, it can rule that all our assets, including housing, be seized.
How to know if I can request a loan without risk?
After all this information, if you still wonder how to know if I can ask for a loan without risk of losing everything, in this section, we give you the main keys.
- First of all, make sure you are in a healthy and stable financial situation.
- Check that you can meet the requested amount, as well as the monthly payments.
- Negotiate quotas and deadlines with the entity that adapts to your needs.
- Avoid taking on new debts once you have a credit.
If despite these tips you see that you will not be able to pay your personal loan installments, it is best that you immediately contact the financial institution. Normally, this will offer you an alternative, such as refinancing the debt, lengthening the repayment term or requesting a grace period.
In Good Credit, for example, we offer you personalized loans that you can comfortably pay in a maximum period of 36 months. In addition, if you have already paid six installments and you look a little in a hurry to pay one of them, you can request a month of respite. As you can see, there is nothing to fear, everything is a matter of organization and responsibility.