What happens if I don’t 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 times in life when setbacks occur, such as a layoff, illness, separation or unexpected expense, which can destabilize the family budget, preventing us from facing 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 contracted to send us a notice either by telephone, postal mail or email. What can we do if this situation arises and we cannot cope with the debt?

What does it mean to have a personal loan?

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Article 1740 of the Spanish Civil Code (CC) defines “loan” as a contract whereby “one of the parties delivers to another a fungible asset so that he can enjoy it for a certain time and once this period has ended, return it to his previous owner ». In addition, article 1753 establishes that” he who receives a loan, money or other fungible thing, acquires his property, and is obliged to return to the creditor as much of the same kind and quality “.

That is, a personal loan is a contract in which the financial or banking entity will advance us an amount of money, with the obligation that we return it within a certain period of time, with previously agreed interests and expenses. In addition, this type of loan, as its name suggests, requires a personal guarantee. This means that the loan holder offers all his present and future assets as collateral. Similarly, 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?

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The first thing to keep in mind is that when we commit to requesting and owning a personal loan, we must be sure that we have sufficient financial capacity to meet its payment.

However, in the face of any setback, we must also be aware that no debt is eternal, they all have a statute of limitations, unless there is a judicial resolution that indicates otherwise. As a general rule, people who take on a debt tend to think that their indebtedness prevails until the total amount that has been loaned to them, in addition to the interest, is not paid. The truth, however, is that, in Spain, debts are not eternal, but are limited by Law 42/2015, of October 5, amending Law 1/2000, of January 7, on Prosecution Civil (SP / LEG / 18525), which establishes a maximum period of five years for the extinction of debts without a specific specified term.

When do you prescribe a personal loan debt?

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In the case of the personal loan, the debt is also extinguished after five years, both of the interest and of the principal amount. This rule also applies to any non-mortgage loan, including credit card debt. In the case of mortgage loans, the debt prescribes at twenty years.

Can I be repossessed for a personal loan?

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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 meet the monthly payment? Do I need someone to guarantee me? 

Placing ourselves in each of these scenarios will help us not find ourselves in an undesired situation in the future. Before the first installment that we stop paying, the financial institution will begin to apply default interest, the amount of which is greater than that of ordinary interest.

Can I be seized for a personal loan?

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 (generally between three and six months), the financial institution will finally initiate a claim through the courts.

As we have seen in previous lines, a personal loan requires all our present and future assets as collateral. So if we cannot assume the payment and the claim goes to the judicial sphere, it is most likely that all the assets that are in our name will be seized from us.

What can be seized if you do not pay a personal loan?

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Next, we will see what 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 that we owe is very high, the judicial sentence can happen to seize the house, the car, the pension, etc. In short, any good necessary to pay off the debt.

In addition, if for us to be granted the loan it was necessary for another person to endorse us, the judge may decides to seize, in turn, the assets of this person, since he has acquired joint and several liability for the debt. Finally, do not forget that not paying a loan also implies that your data be registered in the files of defaulters such as RAI (Registry of Unpaid Acceptances) or ASNEF (National Association of Financial Credit Establishments). This will make it difficult or even impossible for you to obtain financing in the future from a financial institution.

Can my house be repossessed for a personal loan?

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Although, generally, when requesting this type of loan, no real or mortgage guarantee is provided, we are implicitly guaranteeing this debt with all of our present and future assets. So when asked: 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, he can rule that all our assets, including housing, be seized.

How do I know if I can request a risk-free loan?

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After all this information, if you still wonder how to know if I can ask for a risk-free loan to lose everything, in this section, we give you the main keys.

  • First of all, make sure that you are in a healthy and stable financial situation.
  • Check that you can meet the requested amount, as well as the monthly payments.
  • Negotiate with the entity some installments and terms that adapt to your needs.
  • Avoid taking on new debts once you are a credit holder.

If in spite of these tips you see that you are not going to be able to pay the installments of your personal loan, it is best that you immediately contact the financial institution. Normally, this will offer you an alternative, such as refinancing the debt, extending the repayment period or requesting a grace period. At Capital Credit, for example, we offer you personalized loans that you can comfortably repay within a maximum term of 36 months. In addition, if you have already paid six installments and you are 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.