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When a loan is called in, the borrower will be required to repay it in full, and payment facilities will be withdrawn.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.