The number of Belgians who are not paying their debts is increasing significantly year by year. More than 130,000 people had their wages garnished by creditors in 2012. And in the first eight months of 2013, more than 335,000 people stopped repaying their loans. What are the garnishable incomes?

In such difficult situations, lenders can proceed with wage garnishment from the debtor’s income. It is therefore important to be informed about garnishable incomes and the authorized rates, which can vary depending on the level of income.

What incomes can be garnished?

Fixed incomes are subject to garnishment in case of payment incapacity. These include salary, housing allowance, various commissions and production bonuses, year-end bonuses, the thirteenth month, vacation pay, cash-equivalent benefits, tips, and reimbursement of expenses.

Replacement incomes are also garnishable. This includes alimony payments, incapacity benefits, pensions, disability and unemployment benefits, career interruption allowances, and allowances paid by social security funds.

Are there other garnishable incomes?

Other incomes can be garnished, such as rent received by the debtor subject to garnishment, self-employment income, and allowances paid to company directors or managers (including benefits in kind).

According to Belgian legislation, no garnishment is possible on incomes below €1,059. For monthly incomes between €1,059 and €1,138, the maximum rate is 20%. This can reach 30% for an income between €1,138.01 and €1,255, and 40% for incomes between €1,255.01 and €1,373. Any amount exceeding an income of €1,373 can be fully garnished.

Repaying your loan is obviously important because in the event of a default on two monthly payments, the borrower will be registered with the National Bank of Belgium and their loan will be called in.

When a loan is called in, the borrower will be required to repay it in full, and payment facilities will be withdrawn. Moreover, they will be banned from accessing the credit market for 15 months.

A few words of explanation about loan repayment…

Loan repayment in recent news

The number of Belgians having difficulty repaying one or more loans increased again in April, reaching 335,373 units, representing a 4% increase on an annual basis.

The total amount of repayment arrears also hit a new record, at 2.84 billion euros, according to figures released on Tuesday by the Central Credit Register of the National Bank of Belgium (NBB). The increase in the number of Belgians having difficulty repaying one or more loans has continuously risen since a slight decrease in mid-2012.

The average delay per loan now stands at 5,784 euros. In total, 11.42 million loans (8.6 million consumer loans and 2.77 million mortgages) were being repaid in April. These concerned 6.23 million individuals.

When should I start repaying my loan?

Previously, it was quite possible to start repaying your loan two months after signing your loan contract.

For example: if you took out a loan on June 15, you could start repaying it by August 15 at the latest.

Given the aforementioned evolution of loan repayment difficulties, this repayment facility has been abolished, and the current regime is stricter. You are now required to start your monthly repayments no later than the month following the signing of your loan contract.

Thus, if we take the previous example: you must have made the first repayment by July 15 at the latest. Likewise, you must make your next monthly repayments by the 15th of each month at the latest.

What should I do if I have difficulty repaying during the loan term – can I defer a few months of repayment to give myself some breathing room?

Previously, it was possible, with the agreement of your lender or bank, to defer the repayment of your loan by one or two months.

Again, for the same reasons mentioned above, this facility has been abolished, and failing to pay two of your monthly installments will inevitably lead to being registered with all its inconveniences.

At Crédit Populaire Européen, however, we have developed an original solution for people who are experiencing temporary cash flow and loan repayment difficulties. We are therefore able to give you a respite of one to two months. We invite you to contact us and discuss it with our brokers.

All credit brokers are often confronted with this question from their clients: ” Can I repay my loan early?”. In fact, a borrower may wish to repay their loan early, meaning in advance, in other words before the end of the loan contract.
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Events in life can favor the early repayment of a loan: we immediately think of an inheritance, but that is not the only reason. A change of job, a new cohabitation, a financial windfall, a maturing life insurance policy, capital gains from investments, etc. are all happy and favorable events that may prompt the borrower to repay their loan early.

Principle question: can you repay your loan early?

In other words, can the borrower repay their personal loan or mortgage before the end of their contract? The answer to this question is simple. The law allows any borrower to repay any type of loan at any time during the life of the contract.

Financial question: is it always beneficial to repay your loan early?

It is not necessarily beneficial for the borrower to repay their loan early. We will understand better based on a concrete example: imagine a potential borrower taking out an auto loan for 35,000 € to buy a new luxury vehicle. To finance such a purchase, for a new vehicle, the interest rate will range from 3 to 5%. If the person concerned inherits a large sum, it might be more advantageous to invest this money in an investment that can yield more in the long term than an interest rate of 3 to 5%. Real estate, for example, yields an average of 10% per year. Likewise, certain corporate bonds have interest rates of nearly 7 to 8%.

The interest rate of the loan will therefore be a determining factor and the solution to this question will be a matter of personal analysis.

Early repayment of a personal loan

The borrower has the right, at any time, to repay in whole or in part the remaining balance of the principal early. In this case, they are entitled to a reduction in the total cost of the credit equal to the interest and fees due for the remaining term of the contract. They notify the lender of their intention by registered mail at least ten days before repayment. In practice, most brokers are satisfied with a simple phone notification.

If the period between the early repayment and the agreed contract end date is more than one year, this penalty amounts to 1% of the principal amount being repaid early. If the period does not exceed one year, the penalty amounts to 0.5% of the principal amount being repaid early.

The lender communicates the amount of the claimed penalty to the borrower by mail. This communication includes the calculation of the penalty. The penalty cannot exceed the amount of interest that the borrower would have paid during the period between the early repayment and the agreed contract end date.

The repayment made will be allocated first to the due amounts and the prepayment penalty, and the balance will be applied to the remaining balance due on the day of payment. No prepayment penalty is due if, by application of articles 85, 86, 87, 91, or 92 of the law of June 12, 1991, the borrower’s obligations are reduced to the cash price or the loan amount, or in the case of repayment under an insurance contract intended to guarantee the loan repayment.

Early repayment of a mortgage

Early repayment of a mortgage is also possible at any time during the life of the mortgage contract.

In this case, the borrower will owe a prepayment penalty equivalent to 3 months. The interest amount will correspond to the amount taken from the amortization schedule for the month in which the repayment takes place.
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You have several ongoing loans: a car loan of €22,000, a mortgage of €158,000, and a personal loan for the renovation of your garden amounting to €8,500, for example. What are the reasons for a credit consolidation refusal?

You are experiencing some administrative difficulties in managing three monthly repayments and you are wondering if consolidating your loans would reduce the total amount of your monthly repayments.

What could be the main obstacles to achieving these credit consolidations?

1. What is credit consolidation?

Credit consolidation aims – in a way – to carry out a loan grouping. In the example cited below, you have three separate monthly payments to make. By consolidating the three outstanding loan balances, you will have only one loan with a significantly lower monthly payment.

2. What are the benefits?

Firstly, from an administrative point of view, you no longer have to think about paying your three installments each month to different interlocutors. With credit consolidation, you only have one ongoing loan and one interlocutor.

Secondly, it is obvious that the sum of three separate installments results in much higher repayments than if you only had one ongoing loan, even if the amount of this loan is higher.

3. The main reasons for a bank to refuse a credit consolidation?

• You will likely have difficulty obtaining a credit consolidation if you are already in a contentious situation, meaning if you have not paid your installments on time. In this case, you will be registered with the National Bank of Belgium;
• Your banker will analyze your debt ratio, which should never exceed 35 to 40% of your monthly income;
• Your banker will take into account your repayment history;
• Your banker will analyze the quality of the guarantees offered to protect themselves in case of default;
• If you are married, both spouses must consent to and sign the credit contracts.

Many people decide to apply for several loans to ensure the payment of various costly activities, such as buying a house or a motor vehicle and preparing for a wedding. However, managing the repayment of different loans is not the simplest situation and sometimes leads to many inconveniences. Fortunately, there is a much more advantageous solution: credit consolidation.

What are the disadvantages of having multiple loans?

Having different loans means multiple interlocutors and, inevitably, various contracts to sign; not to mention several premiums to pay monthly. Consequently, managing these different administrative elements can often be complicated. Moreover, the accumulation of various premiums can quickly constitute a very high amount, sometimes difficult to pay.

What is revolving credit?

Linked to a credit card, revolving credit constitutes a cash reserve whose amount varies depending on the cardholder and their needs. This type of loan is repaid based on the amount spent using this card.

At first glance, this borrowing technique seems advantageous and interesting. Unfortunately, it often proves to be quite misleading. Indeed, managing your money properly becomes more difficult as it is possible to spend a lot. Repaying the multiple monthly payments, which are sometimes very costly, can therefore be burdensome.

Why opt for credit consolidation?

Credit consolidation offers many significant advantages! With a single contract and interlocutor, your administrative management becomes much simpler. Moreover, you only have to pay one premium per month, which is lower compared to the sum of several loans. Indeed, these loans can be consolidated into a single mortgage, provided there was already one. Another alternative is to establish an installment loan with the various credits. The amount to be paid becomes larger, the interest rates are lower, and the monthly payment is less expensive.

You often see zero-interest credit in some stores or advertisements. What is it? Should you be wary of it? Let’s take a closer look at this question.

1. Who offers zero-interest credit?

These are generally favors granted by supermarkets or large stores that have noticed their customers are more inclined to buy certain everyday consumer products when the price is spread over several months.

2. For what types of products?

These are loans granted by large stores to promote the purchase of everyday consumer products such as hi-fi, household appliances, telephony, or internet… etc…

3. Characteristics

These are loans granted for relatively modest amounts and which run over very short periods (a few months).

4. Crédit Populaire Européen

Our brokerage company and most credit intermediaries and banks do not offer zero-interest loans. However, do not hesitate to check our advantageous interest rate loans in the credit solution section of our website.

A person who can no longer repay their loan must act quickly to prevent the situation from worsening. They must take certain steps to clean up their financial situation in order to settle their debts.

If the problem becomes inextricable, it is important to seek an amicable solution with all concerned parties to facilitate the resolution of the crisis.

The right reactions to have from the beginning

As soon as you experience difficulties repaying your loan installments, you should discuss it with your bank or the lending institution. Specifically, you need to explain your situation by sending a registered letter and request a reduction or deferral of repayments.

Banks have several alternatives to help you overcome this difficulty. This could involve a loan buyback with more favorable conditions for a single loan or a consolidation of several loans into one. It is even possible to negotiate a new structuring of your loan to extend the repayment period and reduce the monthly payments.

When and how to contact the mediation service?

In the absence of a response from the bank within a month or in case of refusal, it is advisable to turn to the courts and seek mediation. This mediation is entrusted to approved professionals, such as bailiffs, lawyers, notaries, and public (CPAS) or private (ASBL) services.

Governed by the law of June 12, 1991, mediation aims to reconcile the interests of the debtor with that of the creditor. After estimating the income and expenses of the former, the mediator proposes a new repayment schedule that ensures the periodic repayment of the loan while allowing the debtor to lead a decent life. The collective debt settlement plan thus established is called amicable if accepted by all parties. It is called a judicial plan if imposed by the judge.

What about the mortgage loan?

The lending institution can take possession of the guarantees put in its possession in case of default by its client. This can involve collateral, wage assignments, or any other means of repayment. If this solution is not feasible or does not allow the lender to recover its due, a foreclosure of the mortgaged property can be implemented.

How to protect yourself from default?

A loan is a contract that binds the future borrower. Therefore, it is important to make an accurate assessment of your professional situation and repayment capacity before taking out a loan. The seniority and financial stability of the employer must be carefully considered to ensure that debts can be honored. It is also advisable, as far as possible, to refrain from taking out multiple loans at once.

It should be noted that there are insurances to protect against repayment difficulties due to life’s uncertainties. This includes the “Guaranteed Housing Insurance” for Flanders, intended for a loan with a term not exceeding 10 years, and the “free insurance against loss of income” for Wallonia, which covers an annual ceiling of €6,200 for a maximum of 3 years.

Are you listed with the National Bank of Belgium? There are solutions to help you access credit. You took out a loan: a personal loan of €25,000 for renovations, car financing of €12,000, or a mortgage loan of €250,000.
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For years, you have been repaying your loan without any issues. Unfortunately, you learn that you are going to be subject to a collective dismissal procedure. Difficulties will soon arise, and your monthly repayments will be affected.

Are there any solutions? Let’s explore this delicate issue.

What is a banking ban?

In Belgium, as soon as you fail to pay two monthly installments of your loan, the lending institution is required to report your credit contract to the National Bank of Belgium. You are then listed.

What are the consequences?

The consequences can be dramatic because the bank can initiate foreclosure proceedings, and your house can be sold by the bank to repay your loan.

Additionally, due to your listing, you can no longer access the credit market until your dispute is settled. Furthermore, once settled, the law imposes a 15-month waiting period before you can access the credit market again.

Are there solutions?

Yes, the first solution is to take out income loss insurance. This insurance comes with specific conditions and is generally limited in duration. Typically, the insurance only covers you for 12 months after losing your job. However, this period allows you to look for a new job as quickly as possible.
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Additionally, in some cases, if you own a property free of charges, your credit institution may settle your outstanding balance with a homeowner loan.
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Prevention above all

In this area, more than others, it is better to prevent than to cure. If you are not certain of your contributory capacity, it is highly recommended to take out income loss insurance or remaining balance insurance (in case of death). In some cases, the bank even makes it a sine qua non condition for accepting your credit application.