What are the risks of missed loan payments?

Taking out a loan is an important financial step that comes with obligations. Whether it’s a personal loan, a car loan, or a mortgage, it’s essential to make your monthly payments on time. But what happens if you can no longer repay your loan? Missed loan payments can have serious consequences, both in the short and long term. Below, we discuss the risks associated with failing to meet your loan obligations.

1. Registration on the National Bank of Belgium's Blacklist

One of the first and most significant consequences of missed payments is losing your creditworthiness. When you fail to pay a loan for more than three months, you may be registered with the Central Credit Register (CKP), also known as the blacklist of the National Bank of Belgium (NBB). This registration can last up to ten years, but it will be shorter if you resolve the situation. Once you’ve fully repaid the debt, the registration will remain for a maximum of one year from the date of resolution.

This registration can make it much harder to obtain new loans, such as a mortgage or personal loan. Banks and other lenders check the CKP list before approving a loan.

2. Possible Seizure of Your Assets

If you fail to make payments, the lender may take various actions to collect the outstanding amount. These actions can include seizing your assets, such as:

• Your guarantee: If you’ve provided a guarantee, the lender can call on it to pay off the debt.
• Your salary: The bank can seize part of your salary through a wage garnishment. Your employer will be notified and will withhold the agreed amount directly from your wages.
• Your property: In the case of a mortgage loan, the bank can seize the property securing the loan. In the worst case, this may lead to the forced sale of your house.

3. Demanding Full Repayment of the Loan

Another option for the lender is to terminate the loan agreement and demand immediate repayment. This means not only the remaining principal but also the interest, late payment penalties, and interest on overdue payments can be collected. In some cases, the penalty may be as high as 10% of the outstanding amount.

4. Reclaiming the Loaned Item

If the loan was taken out for purchasing goods and ownership is reserved (for example, with a consumer loan), the lender can reclaim the purchased item if payments are missed. This also applies to mortgage loans, where the bank may take back the house if you can no longer repay the loan.

5. Possibility of an Amicable Settlement

In some cases, the lender may be willing to reach an amicable settlement. This could involve proposing a new repayment plan tailored to your current financial situation. Late payment penalties may also be considered in the settlement. It may be wise to involve a debt mediator to find a solution that works for both parties.

6. Legal Action and Possible Lawsuit

If attempts to make payments or reach an amicable settlement fail, the lender may decide to take legal action. A court ruling could require you to pay the full loan balance, including interest and penalties. In the worst case, a bailiff may seize your wages or assets to recover the debt.

7. Debt Forgiveness as a Solution?

When the debt burden becomes too high, it is sometimes possible to have your debts forgiven. The Belgian Economic Law Code allows this within three months of the debt becoming problematic. A debt mediator will be appointed to attempt to negotiate a feasible repayment plan with the creditors and seek their agreement.

8. Long-Term Effects on Future Loans

In addition to the immediate consequences of a missed payment, it can also affect your financial future. A registration with the CKP can make it more difficult to obtain new loans. Lenders are required to check the CKP blacklist before approving a loan, and a negative registration can prevent you from obtaining a new loan, even if you later find yourself in a stable financial situation.

Conclusion: Prevention Is Better Than Cure

The risks of missed loan payments are significant and can have long-lasting effects on your financial situation. To avoid these consequences, it’s essential to be well-prepared when taking out a loan. Analyze your budget and ensure that your monthly payments are affordable. If you find yourself in payment difficulties, contact your lender immediately to discuss potential solutions. It’s always better to take preventive measures than to deal with the consequences of defaulting on payments.