Are you considering taking out a loan? Do you know how repayment works and what types of loans exist? Or do you already have a loan, even several, and keeping track of what and where you’re paying back is becoming increasingly difficult? Maybe you can’t even make the payments anymore, the bailiff is knocking on your door and you’re thinking about the desperate solution of taking out a loan to pay off the foreclosure. Whichever of these problems you’re dealing with, our article is here for you.
From the point of view of the person applying for a loan or credit, they are practically one and the same thing and the term loan is commonly used in the Czech language to refer to both a loan and a credit. Similarly, in this article we will refer collectively to loans, although in some cases we will refer to loans.
However, from a legal point of view, a loan is defined in such a way that its object is only funds and is regulated by the Consumer Credit Act. A loan can only be granted to you by entities authorised to do business, usually banks, on the basis of a loan agreement. The validity of a credit agreement begins with its conclusion and is therefore a consensual contract. By signing a credit agreement, you undertake to repay the amount borrowed within a given period of time, together with interest.
Tip: Execution on account is one of the relatively easy options for the bailiff to get to the recovered amount. This freezes the funds in the bank. How does this process work, to what extent is your disposal of your account restricted, how are family members’ bank accounts affected and when is your account unblocked again? This is the focus of our article.
On the other hand, the subject of a loan can be anything and is regulated by the Civil Code. Anyone can grant you a loan on the basis of a loan agreement. This differs from a loan agreement in that it only comes into force when the subject matter of the agreement is actually handed over – it is therefore a real contract. In the case of a loan agreement, you undertake to return the item within an agreed period of time.
First of all, it is important to know that the more you repay, the less you will pay in interest and also the shorter the time you will repay the loan. It follows that it pays to pay off the loan as soon as possible, but of course this is not always possible.
Tip: Do you lend money to anyone? Then our article will come in handy.
The loan can be repaid in several ways:
We’re here for you. We can help you solve your loan and foreclosure problems. We will review contracts before you sign them and advise you on any legal problem.
The world of loans is really diverse and you can find a lot of different types on the market. We therefore give you a basic breakdown to help you navigate this confusing landscape.
If the borrower fails to meet his or her obligations, the court can order enforcement. Enforcement is the formal term for a situation where the court orders the debt to be recovered by various means, such as deductions from wages or the sale of property. Enforcement occurs when the debtor fails to voluntarily fulfil the obligation imposed by the court. Even enforcement can be delayed or limited if the debtor actively communicates and offers a repayment plan.
Foreclosure by sale of the property is a step that should only be taken as a last resort. Which properties can be affected and when can it affect the debtor’s home? Find out in the next article.
If you have more than one loan, consolidation is worthwhile. This involves merging all your loans into one. It works by the bank paying all the loans for you and giving you a new ‘umbrella’ loan on better terms.
Consolidation offers several advantages:
Tip: Has a friend asked you to guarantee his loan? We’ll advise you on how not to get into trouble as a guarantor.
Tip: No method of foreclosure is pleasant, but foreclosure by sale of property arouses the most emotion. You can read how the foreclosure sale and auction of movables works in our next article.
There are also consolidation options on the market for troubled clients without property guarantees. These products are usually offered by non-banking companies, as banks have strict rules and reject clients with a negative track record. The advantage is that there is no need to mortgage assets – which is appreciated by people without property or with complicated financial situations. On the other hand, you have to expect higher interest rates, fees and less favourable terms. Still, consolidationwithout a property guarantee can be a last chance to get a handle on your repayments.
If you default on your loans, you may find yourself in foreclosure. A foreclosure is a court-enforced repayment of debts through various means, including regular payroll deductions or seizure of property. Foreclosure is a last resort when the debtor no longer responds to calls and the creditor turns to a bailiff. Early communication and efforts to reach an agreement can prevent foreclosure and simplify the situation considerably.
Information on foreclosures can be verified in the Central Register of Foreclosures, sometimes referred to as the foreclosure register. The foreclosure registry helps, for example, employers, landlords or business partners to check a person’s reliability. An extract from the execution register can be obtained online for a small fee or at selected Czech POINT locations.
Tip: Read our article on the topic of execution by deductions from wages and other income.
Paying off foreclosures or foreclosure loans is often only a temporary method of protecting your property. It consists of you being given a loan to pay the foreclosure and then repaying the loan. In addition, you can often take out such a loan to pay off foreclosures without guaranteeing the property.
What’s the catch? Only non-banking companies offer this type of loan because banks will not lend money to a person who is in foreclosure. However, a loan from a non-banking company comes with higher interest rates and often hidden conditions and penalties for failure to repay.
Tip: Don’t tackle your debts with more loans and instead read our article on how to protect your property from foreclosure.
In conclusion, it should be stressed that proper handling of finances, prudence when taking out loans and active asset protection are key elements for financial stability and a healthy relationship with loans. It is also extremely important to be aware of all the options available to you and to consider your decision well before signing any contract.
If you are considering a loan or are already repaying several loans, it is important to know the basic principles of loans and credit, the different repayment methods, and the options available to effectively consolidate your debts. Loans vary by purpose, repayment period, guarantor and lender, and consolidation can help you combine multiple debts into one loan with more favourable terms and clear repayment. In the event of repayment problems, there is a risk of foreclosure, which can have serious effects on your finances and assets. While paying off foreclosures with another loan is a temporary solution, it often comes with higher costs and risks, so it is always better to seek professional help and consider long-term solutions. For people with a negative payment history, consolidation for troubled clients without property guarantees may be a solution, but it tends to involve higher costs and risk.
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Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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