Always repay your loans
It often makes sense to save money if you have a big purchase coming up, but sometimes applying for a loan may be the best solution to finance your studies or making the essential purchases for your first home, for example. Just keep in mind that there are costs related to your loan that will increase the overall price of your purchase and add up to the amount you must repay.
You may see many ads for loan products but don’t let them tempt you. It’s important to compare the prices and agreement terms and conditions of various loan providers. Your bank will give you advice on different financing solutions and assess your ability to repay the loan. Only take out a loan if you really need it and have ensured that you can pay it off.
Having a credit card is often necessary if you want to travel abroad and shop online. Many credit cards also offer purchase protection that may come in handy. But remember that with each credit card purchase you make, you’re taking out credit you must repay. If you withdraw cash or make payments with Nordea’s Visa Electron card, you always know your account balance because a temporary authorisation hold is placed on the corresponding amount. You can use your card to make payments online, abroad and in Finland as usual.
Mistake #1: Taking out credit without due consideration
It’s never a good idea to live on credit. Payday loans are a quick and easy way to get money but they may end up costing you a lot. Many payday loans come with high interest rates and fees and you may struggle to pay them off.
Ask yourself: Do I need to make this purchase right now or can I postpone it? If I can’t pay for my purchase without taking out credit, will I be able to afford it later – with all the extra fees and interest included?
If you’re starting to feel like you need to pay off your existing debt with more debt, please contact your bank instead. You can talk through your situation with your banking adviser and find a financing solution that allows you to repay your debt. Failing to repay your loans may result in problems such as a payment default entry in your credit record.
If you’re struggling with your finances, the best solution is not to take out credit right away. First find out how you could regain control over your finances in other ways. The most important thing to remember is that you don’t have to solve your financial problems alone. Discuss the situation with your friends and family.
You can also contact your bank and creditors and ask for expert advice. Compare the prices and agreement terms and conditions of various loan providers. Your bank will give you advice on different financing solutions and how to make changes to the repayment schedules of your existing loans based on its assessment of your ability to repay your loans.
Mistake #2: Failing to pay your bills
You should always pay your bills on time to avoid extra costs and serious trouble down the road.
If you fail to pay your bill even after receiving a payment reminder, you can expect the following to happen:
The creditor may transfer the collection to a professional collection agency that will send you two payment demands: the first one after 4 weeks and the second one after 6 weeks from the bill’s due date. At this point, you can still pay off your debt without getting a payment default entry but you would have incurred extra collection costs and default interest.
If your bill still remains unpaid after 2–3 months from the due date, your case may be taken to district court for the payment.
If you don’t contest the case, the district court will give a default judgement which will result in a payment default entry, and debt enforcement may be initiated.
If you’re unable to repay the debt and garnishing your wages is not possible, your case may be declared as barred for lack of means. This would result in another payment default entry in your credit record.
Even if you paid your bill before getting a payment default entry, you will incur extra costs after each step in the collection process. A small bill of 10 euros may eventually amount to nearly 150 euros when you accrue default interest and add payment reminder fees as well as collection, court and enforcement costs to the original amount.
Pay your bills by the due date. If you can’t do this, call your creditor’s customer service number and ask if they could extend the due date by a few days. They often appreciate that you let them know about your situation and may grant you the extra days you need. In any case, you should always pay your bills as soon as possible. The collection process above will be terminated as soon as you pay your bill. The worst mistake you can make is to let your unpaid bills pile up.
If you’re unable to make a repayment on your loan, please contact your bank. You may be offered the opportunity to take a payment holiday or make other changes to your repayment plan. The most important thing is to discuss your situation with your bank so that you can find solutions to repay your debt.
Mistake #3: Getting a payment default entry in your credit record
You may be faced with some dire consequences if you get a payment default entry. And you might not even understand the severity of a payment default entry until you find yourself in a situation where you need to have a clean credit record. Once you get a payment default entry in your record, it can’t be cancelled and it will be valid for 3 years on average. If you repay your debt and declare it repaid to the credit information register, the validity of your payment default entry will be reduced to 2 years.
Having a payment default entry in your record may cause difficulties in your day-to-day life if you want to apply for a student loan, a credit card or insurance policies, for example. You may also be asked to make advance payments or provide security if you wish to subscribe to a phone or internet plan. Furthermore, you may even find it hard to rent an apartment or get a job if your landlord or employer checks your credit record.
Your payment default entry may also have an impact on agreements made before it was entered in your record. For example, you won’t be able to increase the credit limit of your credit card and your existing loans may come under further scrutiny, too.
If you already have a payment default entry and are in debt, seek help actively. Don’t give up. Some of the advisers you can reach out to include: