Cannot pay back a loan: what a borrower should do

What to do if there is nothing to pay loans with

When applying to the services of microfinance organizations, a potential borrower must soberly assess their financial capabilities. If the loan cannot be returned on time, the individual resorts to one of the following options to solve the problem:

• Extension.
• Restructuring.
• Refinancing.
• Bringing the process to the expiration of limitation periods.

Which option to turn to depends on the terms under which the loan was issued, as well as on the rules of interaction with customers in a particular company. MFOs approach solving problems of this kind differently, so each of the presented points will be considered separately.

What is loan extension

Loan extension is the prolongation of the validity period of the agreement. Such an option is offered by most MFOs. Its essence is as follows:

1. The borrower repays the amount of interest accrued for the current day.
2. The initial amount (loan body) remains unchanged.
3. The agreement is extended for a term chosen by the client.

If the borrower has nothing to pay the loan with, this solution will be the most optimal. In this case, the overpayment increases, but no overdue debt arises. Companies have different extension terms.

At the same time, it is important to keep in mind that this option can be used multiple times in a row until the total amount of paid interest reaches the threshold established by current legislation: 500,000 RUB for microcredit companies (MCCs), and 1,000,000 RUB for microfinance companies (MFCs).

Pros and cons of microloan extension

Extension has a significant advantage: it helps avoid overdue payments. Thus, the client postpones the full repayment date of the debt to the company. For example, according to the contract terms, the borrower must repay the loan on the 15th, but will only receive their salary at the end of the month. In this case, the loan term is extended until the debtor is able to fulfill their obligations.

An important disadvantage of this option is that the initial loan amount remains unchanged. By using an extension, the borrower pays only the interest. Consequently, the overpayment on the loan can be several times higher than the initial amount received by the client under the agreement. Extension is considered an effective tool for one-time use—when you cannot repay the loan debt on time.

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What is microloan refinancing

If a borrower has taken out multiple loans and has nothing to pay with, they can use the refinancing service. In the case of microloans, this tool works somewhat differently than for credit debt.

In its classic form, refinancing is understood as taking out a new loan in order to pay off existing obligations. The point is that the new loan has more favorable terms, so the borrower thus reduces their credit burden. The approximate sequence of actions:

The borrower selects a loan refinancing offer and submits an application.
In the event of a positive decision, the bank transfers the funds to the initial creditor.
The borrower fulfills their obligations under the new agreement—on more favorable terms than the previous ones.

Refinancing does not release the borrower from debt repayment. After using the service, the total debt amount becomes (or may become) lower. Therefore, this option is suitable for those who have sources of income.

How to refinance a microloan

The product called "microloan refinancing" was not widely adopted in the Russian Federation in 2021. Moreover, finding such an offer is quite problematic, as microfinance market companies have not yet transitioned to this model of interaction with clients. If you have nothing to pay a microfinance organization (MFO) loan with, you can do the following:

1. Carefully study the offers of several microfinance organizations—the more, the better.
2. Choose products whose terms are more favorable than the current (unpaid) loan.
3. Submit an application and wait for the company's decision.

In the event of a positive decision by the MFO, the client uses the received funds to pay off the problem debt, and then tries to faithfully fulfill their current obligations. Unlike loan refinancing, here the client performs all actions independently—from receiving the money to repaying the debt to the company.

What to look out for

Taking out a new loan to pay off existing obligations should not be viewed as refinancing. Such an approach can lead to a snowballing increase in total debt—where with each approved application, the amount of debt only grows. If you cannot pay off a loan, its refinancing is carried out according to the following scheme:

• The application is submitted for a more favorable offer—ideally, this should be an interest-free loan.
• The problem debt is paid off immediately after receiving the money from the new loan.

The borrower fulfills the newly issued obligations using their own funds—salary, deposit income, and other sources. If the refinancing scheme is repeated multiple times, this approach will only worsen the problem.

At the same time, there remains a high probability that this option will become unviable. The reason: the client will not be able to get a loan from another company, or the terms for both agreements will be approximately the same. It is also important to consider that without income, including in the future, any attempts to refinance a microloan will be unsuccessful.

What is microloan restructuring

If you have nothing to pay credits and loans with, restructuring is one of the effective ways to solve the problem. Unlike refinancing, restructuring implies changing the terms of an existing agreement, but without the participation of a third-party organization. The service may manifest in the following:

• Granting the borrower the right to credit holidays—the debtor is given time to improve their financial standing.
• Reducing the principal debt amount—in practice, an MFO can "forgive" a troubled borrower a portion of the interest accrued on the loan amount.
• Other types of promotions that somehow simplify the borrower's situation in terms of debt repayment.

If there is no money to repay the loan, it should be borne in mind that restructuring is the company's right, not its obligation. Most MFOs do not practice it, so each specific case should be considered individually.

When a borrower gets the right to microloan restructuring

Restructuring (like refinancing) is not regulated by any law or subordinate act. The company takes this step to resolve problem debt—when all other measures to influence the borrower prove ineffective.

The MFO makes an offer to the debtor: to pay some part of the accumulated debt, after which the agreement between the parties will be closed. When exactly the company will make such an offer and whether it will make it at all is impossible to say for sure.

For example, MoneyMan, being one of the largest players on the microfinance market, gives clients the opportunity to take advantage of the "Debt Forgiveness" promotion. This promotion implies writing off part of the problem debt. At the same time, the microfinance organization does not guarantee that all troubled clients without exception will fall under the loyalty program.

Expiration of limitation periods

In accordance with Article 200 of the Civil Code of the Russian Federation, the general statute of limitations is 3 years. The starting point is recognized as the moment when a person learned or should have known about the violation of their right. The recovery of credit and loan debt falls under the general statutes of limitations.

It is extremely important to remember that for credits and loans, "the moment when a person learned or should have known about the violation of their right" is the day after the borrower goes into default. The bank or MFO cannot fail to know about the contract violation committed by the client. Therefore, the statute of limitations is counted not from the moment the contract is concluded, but from the default on obligations.

If you have nothing to pay off a loan debt and the borrower is waiting for the statute of limitations to expire, one detail must be taken into account. The law does not prohibit creditors from going to court after the limitation periods have expired, and such a claim will be accepted. The borrower can avoid this by filing a petition with the court to terminate the periods established by law. The court will be obliged to dismiss the claim if the deadlines have indeed expired.

If the court refused the MFO's claim acceptance

The opinion that microfinance organizations do not take debtors to court is a misconception. Moreover, to resolve the issue through the Federal Bailiff Service (FSSP), it is enough to obtain a court order (simplified proceedings). At the same time, the company does not go to court for all problem agreements. In some cases, this is unprofitable—the costs of forced recovery may exceed the total debt amount.

The expiration of the statute of limitations and the court's refusal to accept a claim after the borrower's appeal mean that the company will not be able to recover the debt through the court. From the moment the court receives a petition from the debtor, the MFO is deprived of the right to resolve the issue through the courts. Three options remain: write off the debt as bad debt; assign the agreement to a collection agency; continue demanding that the borrower repay the debt, but only on a voluntary basis.

Conclusion

A separate category of clients asks the question: what to do if there are many loans that cannot be paid. The most painless way out of the situation is to find money and pay off the debt.

None of the above methods is that very "magic pill" that can be used to relieve oneself of all responsibility under an agreement with an MFO. To prevent such problems from arising, you must clearly assess your financial capabilities before taking out a microloan.