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What happens when credit funds are not returned in Estonia within the specified period?

Mortgage or Home Loans / Legal intricacies in real estate
21.01.2024
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What happens when credit funds are not returned in Estonia within the specified period?

Returning the loan within the specified period is one of the key conditions on which financial institutions provide borrowed funds. In Estonia, like in many other countries, failure to fulfill this obligation leads to serious consequences for the borrower.

Consequences of loan payment delays

As soon as the borrower misses the loan payment date, they automatically fall into arrears. Late payment penalties start to accrue, the amount of which depends on the terms of the loan agreement. In addition, the bank or other credit institution may start charging interest, further increasing the debt.

Notifications and payment demands

First and foremost, the bank sends reminders to the borrower about the debt and demands its repayment. This can be done through letters, phone calls, or electronic messages. If the debt is not repaid after this, the creditor's actions will become more decisive.

Interaction with collection agencies

If the borrower continues to ignore the demands for debt repayment, the bank may transfer the right to claim the outstanding debt to a collection agency. Collectors will use all legal methods to collect the debt. This process is not only unpleasant for the debtor due to constant pressure from collectors but can also result in additional expenses related to paying for the services of such agencies.

Legal proceedings

In case of refusal or inability of the borrower to repay the debt, the case may be referred to court. The court has the right to impose a seizure on the debtor's property until the case is fully reviewed. In case of failure for the debtor, they will be obliged to not only repay the principal debt with penalties and interest but also cover the court costs and possibly expenses for legal assistance.

Consequences for credit history

One of the most serious consequences is the deterioration of the borrower's credit history. Missed payments and records of delinquencies significantly lower their credit rating. This can make it difficult or even impossible to obtain new loans in the future.

Forced realization of collateral

If the loan was provided with collateral (mortgage), the bank has the right to enforce the seizure of the pledged property in case of non-repayment of the debt. This means that the property can be sold to cover the outstanding debt.

Personal liability

In Estonia, it is also possible to hold the debtor personally liable if intentional deterioration of the financial situation to avoid debt repayment is established (for example, hiding assets).

Options for resolving payment difficulties

If you encounter difficulties with payments on your loan, the main thing is not to ignore the problem:

  1. Contact the bank: Explain your situation and inquire about possible ways to restructure your debt.
  2. Debt restructuring: The bank may offer temporary changes to the terms of your agreement, such as a deferral of principal or interest payments.
  3. Financial consultant: Seek assistance from professional financial consultants.
  4. Personal bankruptcy: In the last resort, consider declaring personal bankruptcy as a way to structure and partially write off debts under certain conditions.
Conclusion

Failure to return credit funds in Estonia entails serious consequences for the debtor, from penalty charges to the loss of property and damage to financial reputation. By resolving financial difficulties through the methods and approaches described above, you can minimize the negative consequences or completely avoid legal proceedings and preserve your financial well-being for the future.

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