To date, the lending industry is actively developing due to massive demand. Making a deal does not take much time, but you need a minimum of documents for this. But banking terminology is not known to everyone, so not many people know what loan debt is. The concept is used when there is a loan debt. Lack of debt confirms the responsibility of customers who are subsequently offered more profitable services.
Definition
Loan debt is the amount of funds provided to a borrower by a bank on the basis of a loan agreement, the conditions of which have not been met. Debt arises from late payments. The amount will decrease when the money is returned to the bank.
Net loan debt is the amount provided to the borrower without interest, commissions, interest, penalties. All this is confirmed by the contract. Net loan debt is a receivable that appears not due to the fault of a financial institution, but due to extraneous circumstances.
Types of debt
There are 2 types of debt:
- when the repayment time has not yet arrived;
- delay.
The latter also has a classification:
- expected;
- doubtful;
- hopeless.
Even if there is a loan debt, it provides an opportunity to pay the debt by the client. For this, the bank offers restructuring, installments or deferrals.
Dates and forms
There are 3 forms of debt established by the payment period:
- current: interest payments are delayed for 5 days, for 6 days, up to 1 month, more than 6 months, or there is no delay;
- re-issued: re-registration occurs without changing the terms of the contract or with their inclusion in the original document;
- overdue: includes a delay in the principal debt of up to 5 days, from 6 to 30 days, from 31 to 180 days, more than 180 days.
How arises?
The deterioration in the solvency of the client is influenced by many factors. Even with a positive outlook, circumstances arise that make it impossible to pay off a loan.
If money is borrowed and has not been repaid, it is considered a debt. This may be due to job loss, lower wages, illness. There are many reasons, but in any case, the debt must be repaid.
Bank Risks
The work of banks is associated with various financial risks. These are operational, market, credit. A big threat to the institution's activities is the non-return of funds provided to customers. A common reason for this is illiterate policies in this area.
That is why banks control payments to their customers on loans and borrowings. Cooperation of a bank with a client depends on responsibility and debt repayment. The amount of loan debt must be repaid on time.
Debt relief
Banks do not want to risk that customers will not be able to repay the debt. That is why all risks are minimized. But since it is impossible to completely protect oneself from insolvency of clients, they have a reserve of loan debt created from interest from other loans.
Banks in rare cases write off debts, usually this occurs in the following cases:
- a small amount of debt;
- death of a borrower who has no heirs;
- after bankruptcy.
Information about debts in the bank is 5 years, and during this time the borrower's solvency is monitored. If the client has income, the lender encourages him to repay the debt. Borrowers should not skip payments or refuse to pay, as lenders are more protected by law. If money was borrowed, then there will still be a recovery from the debtor.
It turns out that loan debt does not include interest. The modern banking system works smoothly, thanks to which lenders know how to reduce the risks of non-return of money. This should be considered by each borrower when applying for a loan.
Amortization
The contract indicates how the repayment of loan debt occurs. Funds may be contributed:
- equal payments: they include principal and interest;
- differentiated payments: interest is accrued on the balance.
When choosing a procedure for paying debt should take into account the full amount. The best option can be calculated using a calculator. Having set the maturity, the bank does not have the ability to change any conditions. The payment plan becomes updated with debt restructuring.
Debt repayment account
When a loan is issued, the bank opens a loan account with which various methods of repaying the loan are implemented . Its availability is necessary for:
- making payments in non-cash form;
- receipt of account statement;
- binding to the current account.
There are no account fees. There are several forms of accounts, the type of which is determined by the contract and the category of the borrower. After repayment of the loan, you should take a certificate stating that there is no debt. Sometimes the account cannot be closed due to unpaid additional services, and this negatively affects the credit history.
If you make payments through the cash desk of the bank, you can avoid additional fees. But then funds are credited on time. Not all banks operate cash desks in the evenings and weekends. It is convenient to deposit money through an ATM. Now there are other replenishment methods: electronic systems, terminals, bank cards.
Timely payment of a loan makes the client respected in the bank. He will be given advantageous offers at low interest and flexible terms. Debt repayment allows you to prevent many unpleasant events in life.