A mortgage is a commitment for many years. Fat or lean years – we do not know this, because nowadays it is more and more difficult not only to forecast but also to plan our future. However, we must have money for the installment. Will the bank help when we are down? We don’t count on it.
A mortgage is a commitment for many years. Fat or lean years – we do not know this, because nowadays it is more and more difficult not only to forecast but also to plan our future. However, we must have money for the installment. Will the bank help when we are down? We don’t count on it – specialists of the financial comparison website inform.
When a bank decides to lend us money
It will expect one thing: regular and timely repayments. At the time of applying for a loan, our financial situation is good – a salary affects the account every month, and sometimes the employer rewards us with a bonus or in some other way additional income appears in our family. The problem arises when work is running low. And yet the decision to take a loan on our shoulders means that we have to pay it back regularly. Regardless of the current financial situation, the bank will expect to pay installments according to the schedule. And this is a fact that we can take for granted. Food and subsistence expenses as well as the necessity to pay bills are equally certain.
Taking a loan for 20 or 30 years, we have to reckon with the fact that we will have to face both positive and negative events, such as marriage or divorce, change of job or loss of it etc. The list of successes and failures is long, and which points will fill our life, in less and less – as pessimists say – depends on us. At the same time, as optimists maintain, it is never so bad that it could not get worse. Everything that happens to us affects or will affect our economic condition, and many events cannot be protected. Besides, insurance does not always make sense.
There is no installment and what next?
Debt collection. For every borrower, this word raises the pressure. The consequences of not paying installments are not pleasant – the bank is starting a debt collection process, and in extreme cases will even want to bid our flat if there is no other way to pay back the loan. Paying installments with a delay is also a cause for concern, although smaller. Three months of arrears with them means placing our personal data in the Credit Information Bureau under the heading «Unreliable debtor».
That is why it is worth trying to make sure that paying off monthly installments is not endangered – says Campanaria The best and effortless way is to accumulate savings so that if necessary you can spend them on servicing the loan. You should also remember about the family, which is often able to help us – but does not do it because … we are unable to turn to loved ones for help. Some do not allow their pride, others do not know what arguments to use to make their request effective. Is there any way for a bank to reach out with a helping hand?
Solution – insurance
Many banks, along with a mortgage, offer their clients the opportunity to insure themselves against the risk of losing their jobs. Such insurance guarantees that if we are dismissed from work, the insurance company will pay mortgage installments for us. Mostly for 6 or 12 months. It is such a long time that we have a chance to find another job, get financially on our feet and resume self-repayment.
However, note – the insurance does not cover situations in which we decide to terminate ourselves or when we arrange with the employer to terminate the contract by mutual agreement. Insurance companies want to be sure that the loss of job was not the fault of the client or that it was not a way of obtaining compensation in the form of repayment of installments. Such a policy covers only those situations in which the loss of job was not associated with the deliberate actions of the client. The insurance can also cover the risk of collapse of our business activities.
The most common scope of such insurance is – in the case of persons working under an employment contract – termination of employment for reasons beyond the client’s control. Another requirement is to obtain the status of an unemployed person with the right to benefit. And one more thing. The notice must be given by the employer; the policy will not work if the employee has terminated or the contract was terminated by mutual agreement of the parties. When you run a business, you need to unregister it and officially become unemployed – remind experts from the financial comparison website.
Insurance is of course not free – the banks’ offers include policies whose costs range from 0.03 percent. up to 3.5 percent per month for 5 years. Is it worth it? Take, for example, a loan of 100,000 $ with a monthly installment of 1 thousand zł. Let’s assume that the cost of insurance for a period of 3 years is 1.5% of the loan amount and provides protection for 12 installments. Such a policy will cost us $ 1,500 – in return we will receive a guarantee that the insurance company will pay the loan installments for us for 12 months, which means we can receive $ 12,000 in total dollars. Of course, if we are out of work all the time.
What about the bank?
Banks also want customers to pay back loans regularly, even if they have financial problems. Therefore, in addition to offering unemployment insurance, banks often use additional incentives to persuade clients to take advantage of such a solution. The catalog of these «incentives» includes, among others reduction of the loan margin or commission for granting it – sometimes even the latter is missing. If we happen to have lost our job, let us immediately inform the bank about this fact. You can then take advantage of credit holidays or extend the repayment period, thereby reducing the installment.
It is in the bank’s interest to recover the money borrowed. At the time of repayment, the bank will no longer be interested in whether we have money or not. A bank representative will contact us when the installment is not received on time. Then there may be a problem with negotiations. If we lost our source of income, we have no savings, and the family can not help much, let’s go to the bank as soon as possible. Admitting to losing your job does not have to mean that the bank will immediately terminate your loan agreement and order you to repay the whole debt. It may persuade us to the above mentioned credit holidays (then we will have to pay back interest at least) or extend the loan period. One option is to find someone who will repay our loan for some time. However, if the installment ceases to be received by the bank soon enough, it may turn out that the bank will terminate the contract and order repayment of the loan in full within a few days.