Can you buy back your debt from the bank?

Why and how does the bank sell debts to third parties?

The Central Bank monitors the level of overdue loan debt in each credit and financial organization in particular. A large amount of debt can be the reason for revoking the license to carry out activities from a bank or microfinance organization.

To prevent the accumulation of problem debts, banks try to "dump" them to third parties. The legality of this measure is determined by Articles 388-390 of the Civil Code of the Russian Federation.

Usually, collection agencies acting on a legal right to conduct their activities act as the third party. Much less frequently, banks sell debts to individuals — as a rule, the most hopeless loans are transferred to them.

Can you buy back your own debt from the bank?

The Ministry of Economic Development put forward an initiative according to which debtors could get the right to buy back their debts from banks at the same price for which they are sold to collection agencies.

In addition, the initiative provides for the possibility to buy back your loan at any time. Even if it was transferred to third parties. It is assumed that after the debt is sold to collectors, the borrower will be able to buy back the loan at double the price. And in cases where the bank did not offer the debtor to purchase the debt — at half price.

Banks, of course, were not thrilled with this initiative. They believe that if such a measure is introduced, all debtors will want to buy back their loan at a reduced price, which will negatively affect the financial market. Therefore, this initiative has been sent back for revision for now.

How to buy back your debt from the bank: step-by-step instructions

You will not be able to buy back your debt from the bank on your own. Despite the fact that there is no direct prohibition in the legislation on buying back your own loan, financial institutions are reluctant to enter into such transactions.

However, banks can sell the debt to another individual if it is a hopeless loan. In this case, you can convince a relative or just a close person to arrange the buyout in their name.

You can do this as follows:

1. First, you need to find a representative. It is better if it is a close person who will not take advantage of the situation and will not demand significant remuneration for the service.
2. Then your representative must submit an application to the bank requesting the assignment of the right to claim the debt. In the request, they need to provide their last name, first name, and patronymic, the borrower's passport details, and the number and date of the credit agreement.
3. If the bank agrees to the transaction, you will need to sign permission to change the creditor.
4. Then your representative will need to conclude an agreement with the bank on the transfer of the right to claim the debt and deposit the agreed amount. The creditor, in turn, must indicate that from that moment they have no claims against you regarding the debt.

For reliability, we advise you to obtain a certificate from the bank stating that you have no debt to the former creditor.

Thus, with a positive outcome, you will be able to buy back your debt from the bank in the amount of 30-40% of the initial amount. In the worst case, the buyout amount may be 70%. It all depends on how hopeless your loan is.

What debts can be bought back from the bank?

In fact, through a representative, you can buy back any loan — there are no legislative restrictions on this matter. However, banks will not assign the right to claim the debt for the following types of loans:

1. Mortgages and auto loans, as well as loans with other types of collateral. Collecting money on such debts is simple — it is enough to realize the property or hold the guarantor liable. Therefore, it is simply unprofitable for banks to sell such loans to third parties.
2. Insured loans, the payments on which cover the amount of the debt. In this case, selling the debt to your representative is also impractical, since the bank will be able to receive insurance payments for the loan anyway.

Advantages of the procedure

For banks, this is an ambiguous procedure, since the creditor loses a significant part of the profit by selling the loan to third parties. But the advantages for the borrower are quite obvious here:

• the debtor relieves themselves of the need to pay interest and penalties, and also significantly reduces the principal debt;
• immediately after the assignment is processed, the borrower's loan will be considered closed, and therefore information about overdue payments will stop flowing into their credit history;
• the debtor will not have to experience stress when communicating with collectors or bailiffs.

Alternative way to buy back debt from the bank

The bank may not agree to sell the loan to your representative, but it will definitely agree to assign the right of claim to a collection agency. If you understand that you are not able to repay the debt to the creditor in full, you can contact collectors and conclude an agreement with them.

You can negotiate the following deal with the collection agency: the collectors buy out your loan from the bank, and you in turn immediately repay the debt in a single payment equal to the amount of the debt plus a commission for their work.

Let's summarize. You cannot buy back your debt from the bank without involving third parties — although there is no direct prohibition in the law on such a procedure, banks will never meet you halfway on this issue. However, you can try to buy your loan through a representative or a collection agency.