Over-indebtedness in Belgium

Is this another sign of the crisis? The number of over-indebtedness reached the record figure of 324,063 people in September 2019. The percentage of defaulting borrowers is now 5.2%. This means that out of 100 loans granted, the credit organizations record 5.2% of default. This leads the said organization to denounce the credit to the National Bank of Belgium.

Evolution of the number of over-indebtedness

Evolution of the number of over-indebtedness

This figure, frankly, changes little. Indeed, if there are more over-indebted citizens, it is also because there are more registered credit contracts.

The proportion of defaulting credit contracts remained stable. The average amount of arrears, on the other hand, increased by 2,000 dollars in 5 years. In 2007, when a Belgian had a slate, it revolved on average, around 6,000 dollars. This figure climbs to 8,000 dollars today.

The situation is mixed depending on the region. Payment default affects 8.1% of borrowers in Brussels. 6.9% in Wallonia and 3.5% in Flanders. If the percentage of over-indebted borrowers is lower in Flanders, the amount of their arrears is higher. It averages $ 9,500.

The total amount of overdue repayments rose in one year from 2.615 billion dollars to 2.645 billion dollars.

The profile of over-indebted people is very specific. Half of them are between 25 and 44 years old. In addition, one in two lives in a household that earns no more than $ 1,250 per month.

The consequences of a default

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First, the credit organization has a legal obligation to denounce the credit contract to the National Bank of Belgium. What does that mean? As soon as you have accumulated three unpaid monthly payments, the bank has the obligation to denounce you by registered mail and proceeds to file with the National Bank of Belgium.

Direct consequence: you can no longer obtain credit in Belgium as long as you do not fully settle the amount of arrears, interest on arrears and any compensation included for termination of the credit contract. Then, the law obliges you to wait another 15 months before you can borrow again in Belgium.

In addition, if the default relates to a mortgage, the consequences can be dramatic. The bank will, in addition to filing, seize the property of the house and it can be sold in the public sale (exactly as it happened in the United States or Spain following the recent real estate crises).

Sometimes, the borrower will be unpleasantly surprised to find that despite the sale of the house, his debt remains very high because the default has occurred in the first years, the borrower will have reimbursed much more interest than capital…

Our prevention policy

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We have implemented a policy of prevention of default cases and we inform our clients about mortgage credit to protect their interests as well as possible.

Regarding the installment loan, our brokers study and analyze the files of candidate borrowers as best as possible. We respect the proportion of debts that do not exceed 40% of revenues. We discuss with our customers the amounts requested, the desired duration, the allocation of funds. It is sometimes better to receive a little less money, to be more reasonable, but to be sure that you can repay your credit. This is the essential mission of advising our brokers.

In terms of mortgage credit, we practice absolute transparency. Some organizations sell borrowers very low-interest rates. The flip side is that the borrower repays much more interest than principal and in the event of default in the first 10 to 15 years of the credit agreement, it is a disaster.

We advise you to pay more capital than interest, even if it means paying a slightly higher monthly payment. The two advantages of this solution: we force you to become aware of your ability to contribute and you repay the capital much faster than the interest. In the end, the total cost of your loan is obviously lower, which is your interest.

 

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