If you have not yet been late on your monthly payments, but you are finding it increasingly difficult to pay or if you know that in the near future it will be difficult for you to continue with this repayment (for example, due to unemployment), then know that there are solutions.
Imagine that you have a car loan and that, for family or professional reasons, you are having difficulty spending 300 euros of your salary for this expense. You can contact the financial institution and try to renegotiate credit. It is possible to reduce the monthly fee, for example, by extending the payment term.
But if, in addition to the car loan, you are also paying for the financing requested to renovate the house, you can choose to debt consolidation. By combining all your credits in just one, you have the following advantages: the institution is only one, paying only one installment; the payment term can be extended and the interest rate can decrease. In this way it achieves greater budgetary slack.
It can also be the case that you have a mortgage and are paying a very high interest rate. The transfer of a financing of this type to another bank can be an asset, since the consumer can obtain a spread more competitive and, consequently, a lower monthly fee. However, there are associated costs you should know before downloading.
Overdue payments: what to do?
If you are already in arrears with your bank, do not despair. There are also solutions to rebalance your personal finances. However, if you do nothing, you may come across more serious situations, such as the attachment of your home.
Thus, the first step is to speak to the financial institutions in which you hold one or more credits. See if you can integrate the PERSI, a procedure that helps the customer to pay his arrears. In this process, the bank assesses your situation and will propose solutions that are appropriate to your current financial standing.
In the same way that you can ask to join PERSI, the client can also access, free of charge, information, monitoring and financial advice through the Banco de Portugal's Indebted Consumer Support Network (RACE).
As a last resort, and after trying all the other solutions available to pay arrears, the consumer can choose personal insolvency. However, this step must be taken consciously and informed about all the inherent consequences.
What happens in the late payment of monthly fees?
When you do not pay the monthly installment on the date agreed between you and the financial institution, the latter may charge a default interest rate. Interest on late payments or interest on arrears derives from an annual surcharge whose maximum ceiling set by the Bank of Portugal is 3%.
Late interest rate formula
Default interest rate = Credit interest rate (TAN) + 3%
This interest is applied to the amount of the installment due, extending over the period of default of the client. If a customer has overdue payments, the bank may convert the interest on the monthly installment into capital (a procedure financially called capitalizing), applying new interest on these.
Calculation of default interest
Interest on arrears = Payment in arrears * (default interest rate / 360) * number of days overdue
However, for this capitalization of interest to occur, it is necessary that there is a written agreement between the customer and the bank. Note also that this capitalization cannot be made for interest on late payments, but only for interest included in the calculation of the monthly installment.
In addition to the default interest to be applied to installments in arrears, financial entities may also require the payment of a recovery commission for amounts owed. This is charged only once, for each installment in arrears, and cannot exceed 4% of the monthly fee and should vary between 12 euros and 150 euros.
But there is an exception. If the value of the installment in arrears exceeds 50 thousand euros, then this commission cannot be greater than 0,5% of this monthly fee.
Finally, if you do not regularize the payment of arrears, your name may be included on the Banco de Portugal Black List, making it more difficult to obtain financing in the future.
Although our goal is always to be compliant and not accumulate arrears, the truth is that, for reasons that we were unable to overcome, it may be difficult to pay the monthly installments of the credits.
If this is your case, contact your bank to resolve the situation in a timely manner and, thus, avoid paying interest on late payments and staining your name at Banco de Portugal.