I am currently having problems repaying loan instalments due to the COVID-19 crisis. What should I do? What solution might I be able to arrange with my borrower?
In the event that you run into difficulties keeping up payments, you should act as quickly as possible, since in this case it is important to avoid additional high costs! Try to arrange a meeting with your lender as quickly as possible (bank, leasing company, credit card company etc.)! It is best if you already contact your lender before you have missed a payment. You can only avoid considerable additional costs by reaching a mutual agreement with you lender, like high default interest payments and expensive reminder fees.
There are a few possibilities that you may agree upon with your lender.
For example, it is possible to arrange a suspension for one or several instalments. This means that one or several instalments are suspended from becoming due and these instalments are only repaid at a later date. This way you can tide yourself over in the event of a temporarily difficult financial situation.
It is also possible, however, to arrange lower instalment amounts while simultaneously extending the term of the loan.
It is also possible to arrange to convert the overdraft on your current account into a cheaper repayment loan.
Austrian Bausparkassen (building and loans associations) have already been active and are offering customers experiencing financial difficulties the possibility to suspend repayments on their building savings loans. For example a large Bausparkasse is offering its customers the possibility to suspend repayments for up to six months, and during this period to only pay the interest being incurred on the loan.
Irrespective of what measure appears to be suitable for you, your lender must in any case explain to you about all financial consequences that arise, without charging you for this advise.
In the event that you end up in a position of indebtedness from which you cannot see a way out, you should contact a government recognised debt counselling organisation without delay (in Vienna: www.schuldnerberatung-wien.at). Austria’s regional Arbeiterkammer (Chambers of Labour) www.arbeiterkammer.at will also provide advice if you have further questions about this topic.
In its statement published on 25 March 2020, the European Banking Authority (EBA) clarified that it supports the flexible using of regulatory scope, but that no such leeway exists with regard to consumer protection. Lenders must act in the best interest of the consumer, and ensure free of charge that the borrower has an overview of and is able to understand all consequences of any measures taken. In addition, the measures shall not in any way be allowed to have a negative impact on the borrower’s credit rating.
CAUTION: Exercise utmost care regarding loan sharks or debt consolidation companies. Unfortunately trusting consumers frequently fall victims to dubious online providers. Advance payment fraud is a particularly common method of fraud in this regard. In this case a credit intermediary demands a processing fee in advance, e.g. for checking your credit rating etc. In the case of advance payment fraud, the money that is transferred is lost, and you also do not get a loan.