Can’t pay your installments? Know what to do.

If you are in a financial situation and are unable to pay your installments or are predicting that this could happen soon, don’t despair. In this article, we give you the tips you need to know how to act before it’s too late.

In 2020, the indebtedness of families reached the highest value in the last four years, as a result of Covid-19. According to data from Banco de Portugal, it reached 141.3 billion euros – 2.3 billion euros more than in the same period in 2019. This means that household debt increased, on average, by 6.3 million euros. euros a day since the pandemic started.

In the same vein, Deco also received 30,100 requests for help in 2020 – more than in 2019 and 2018, years in which the trend had stabilized. The increase in over-indebtedness is explained by situations of unemployment, loss of income, job insecurity or business that went wrong. So that the indebtedness of families does not worsen further, the Consumer Defense Association argues that the moratoriums should be extended: the vast majority ends only in September, but the private moratoria have already ended in March.

If this is your case, see what you should do and what mechanisms you can use to avoid defaulting.

If you are having difficulties in paying the benefits or expect that you might have it, for example, due to a cut in your income or unemployment, let the institution with which you contracted your credits know as soon as possible. Don’t wait until you miss the first payment. Together, they can assess how best to avoid default.

If you don’t know how to act and are afraid to choose solutions that are not the best for you, seek advice from someone who knows. At RACE – The Support Network for Indebted Consumers – of Banco de Portugal, you will find a complete list of entities that can help you. Access to these entities is free and they can inform you about your rights and duties, support you in the analysis of proposals from financial institutions and accompany you during negotiations. However, they may not act with banks or financial entities on their behalf or use any mediation or arbitration mechanism. You can consult on this portal which entities are closest to you.

There are also mechanisms provided by the State for this type of situation, which you can use:

  • Action plan for the risk of default (PARI):</ strong> When you notify your bank or financial institution that you are having difficulty in paying the benefits or are in danger of defaulting, you are entitled to receive a document informing you of your rights and duties. According to the Banco de Portugal, the institution where you have your credits must assess your financial situation, find out if you have a way to avoid non-compliance and propose payment solutions that are appropriate to your situation. For this to happen, you must provide all the information and documents requested within 10 days. If you feel that you are not being given the necessary support, you can make a complaint in the Complaints Book or directly with Banco de Portugal.
  • Public Support System for Conciliation on Over-Indebtedness (SISPACSE): through this system you have access to a conciliator, that is, a qualified professional who can not only give you information but also promote negotiation sessions between the debtor and creditors, in order to reach an agreement. This mechanism is recent and, since February 21st, the registration phase for those interested in being conciliators has been underway. According to the statement from the Council of Ministers, the debtor’s adhesion is voluntary and may have costs, although low.
  • Extrajudicial procedure for the settlement of default situations (PERSI):</ strong> if you have already failed one or more installments, you are in default and have the right to be included in this procedure. It can happen at your request or at the initiative of the financial institution: if you have given prior notice, the bank or credit institution must integrate it into PERSI as soon as you are late in paying the first installment, if you have not previously warned, this should happen between the 31st and 60th day after default. It should be informed that it is included in this procedure five working days after this happens. From then on, you must provide all the requested information within 10 days and then, within the next 30 days, the credit institution must submit proposals to regularize your situation. After receiving these proposals, you can also make your suggestions. The credit institution cannot charge you commissions for this procedure, however, you may have to pay expenses related to registries, notary offices or finances, upon presentation of the proofs.

If you’ve ever asked for help or advice, you’ve probably heard or will hear about these solutions.

  • Debt renegotiation: if you are not able to pay the entire mortgage or car loan, for example, one of the options may be to extend the payment period. You will pay less per month, however, as you extend the term, in the end, the loan becomes more expensive. Better than increasing the term will be able to reduce the interest rates associated with your credit.
  • Credit Consolidation: means joining several credits into one. In addition to being easier to manage just one installment debited in a single day, by concentrating everything in the same institution, you will only pay the interest rates on that credit (and not several) and can save on commissions. To use consolidation, you cannot be late on payments and, if you are unemployed or considered a risky customer, the bank may refuse your request. Consolidation cannot be used for mortgage loans.
  • Deliver the house to the bank: If your only debt is mortgage, this can be a last resort solution. But be careful, it’s not as simple as it sounds! For now, not all banks accept it. As a rule, they only do it if there is no other alternative and if your property is a good investment and easy to sell. If they accept your request, they will demand a revaluation of the property. And if the value of the house is not enough to pay the entire debt, despite being left homeless, you will still have to pay the rest – for example, through the use of a personal credit – as well as the costs of the process (opening of process , evaluation, writing, etc).

Remember that information is power. So, do your research and evaluate the available alternatives before making a decision.

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