Evolution of the number of over-indebted individuals
This figure, to be honest, changes little. Indeed, if there are more over-indebted citizens, it is also because there are more credit contracts registered.
The proportion of defaulting credit contracts has remained stable. The average amount of unpaid debt, however, has increased by 2,000 euros in 5 years. In 2007, when a Belgian had a debt, it averaged around 6,000 euros. This figure rises to 8,000 euros today.
The situation varies by region. Payment default affects 8.1% of Brussels borrowers, 6.9% in Wallonia, and 3.5% in Flanders. While the percentage of over-indebted borrowers is lower in Flanders, the amount of their payment arrears is higher. It averages 9,500 €.
The total amount of outstanding repayments increased in one year from 2.615 billion euros to 2.645 billion euros.
The profile of over-indebted individuals is very particular. Half of them are between 25 and 44 years old. Moreover, one in two lives in a household earning no more than 1,250 € per month.
The consequences of a payment default
Initially, the credit institution has the legal obligation to report the credit contract to the National Bank of Belgium. What does this mean? As soon as you have accumulated three unpaid installments, the bank is obliged to notify you by registered mail and proceed with your registration with the National Bank of Belgium.
Direct consequence: you can no longer obtain credit in Belgium until you fully settle the amount of unpaid debts, including late interest and any penalties for reporting the credit contract. Then, the law requires you to wait another 15 months before you can borrow again in Belgium.
Furthermore, if the payment default concerns a mortgage loan, the consequences can be dramatic. The bank will, in addition to registration, proceed with the foreclosure of the house and it may be sold at a public sale (exactly as happened in the United States or Spain following recent real estate crises).
Sometimes, the borrower will have the unpleasant surprise of finding that despite the sale of the house, their debt remains very high because the payment default occurred in the early years, and the borrower will have repaid much more interest than principal…
Our prevention policy
At Crédit Populaire Européen, we have implemented a prevention policy for cases of payment default and we inform our clients regarding mortgage loans to best protect their interests.
Regarding installment loans, our brokers study and analyze the files of prospective borrowers as best as possible. We adhere to a debt ratio that does not exceed 40% of income. We discuss with our clients the requested amounts, desired durations, and the allocation of funds. Sometimes it is better to receive a little less money, be more reasonable, but be sure to repay your loan. This is the essential advisory mission of our brokers.
In terms of mortgage loans, we practice absolute transparency. Some institutions sell borrowers very low-interest rates. The downside is that the borrower repays much more interest than principal, and in case of payment default in the first 10 to 15 years of the credit contract, it is disastrous.
We advise you to pay more principal than interest, even if it means paying a slightly higher monthly installment. The two advantages of this solution: we force you to become aware of your contributive capacity and you repay the principal much faster than the interest. Ultimately, the total cost of your loan is obviously lower, which is in your interest.