Bank loan default process

On March 27, 2011, in News, by Lewis Alexander
  • free credit report UK from ExperianSince the start of the credit crunch, financial news in the UK has been littered with news about sub-prime lending, bad debt, poor credit risk decisions and negative reviews on how little the high street banks are now lending personal and small business customers.

In effect, the kamikaze lending of the early ‘naughties’ has been replaced with the polar opposite of a lending freeze as banks attempt to repair their decimated balance sheets and prove to regulators and the government that they are viable businesses that no longer require tougher regulation and handholding to restructure their business models.

This is in stark contrast to the type of lending that was made in the 1950’s and 60’s when the role of a High Street Bank Manager was considered to be a responsible, respectable leader at the heart of a community.  During these times, any lending decision made was preceded by an application and the personal interview of the person(s) applying to consider their suitability for the loan in question.

A holistic approach was taken to the ‘credit risk’ decision by a bank manager or one of their senior officials.  In this process, the application, interview, local knowledge, return on investment and sheer  ability (and willingness) to repay a loan were all considered key elements of equal importance, In stark contrast to the ‘computer says no’ processing that Little Britain has regularly satirise.

Perhaps an overlooked feature of the process from these post-war years was inclusion of walking prospective borrowers through the full consequences of a default or failure to make the repayments.  This process included stating in full all the charges that would be incurred, how the bank would go about reclaiming the money, what this would feel like for the customer and ultimately how debt collection agents would go on to seize assets that have been secured against any loans if necessary.  This cold, yet stark appraisal of the worst case scenario at least left all borrowers in no doubt of what would happen if the repayments could not be met.

This is in contrast with today’s process of handing out 100-page booklets detailing the terms and conditions of the loan (which in fairness do highlight charges that would be incurred from non-repayment) but these statements are written down and are not accompanied with a full and frank description of what this collection process would feel like.

The modern bank executive manager would suggest that a return to such a halcyon age would result in the increase in application times and thus reduce the profitability of each branch and employee.  But perhaps this overlooks the need for banks to play a more active role in educating society and fulfilling the role of responsible lending.

Getting into trouble and behind your scheduled rate of repayments is easy and the stress this causes can build up quickly.  If this position rings true for you, then perhaps a call to one of our debt management specialists would help you to restore order, structure and a help to plan long-term to get yourself out of debt and back into the black.

Our dedicated debt advisors are available on 0800 018 6868 and we are trained to advise on your specific circumstances and help you take control of your finances once again.  We understand the intricacies of the modern day personal debt and are happy to try and explain any complexities you did not previously understand, together with the collections and recoveries process that most financial bodies use.

Simply understanding the perspective of your lending institution can help you to form an action plan for you to put into practice.  So don’t delay, if you need help with debt call Lewis Alexander today using 0800 018 6868.

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