Learn how to avoid credit default!

If you are in a tight spot with your personal finances and have payments to meet, now is the perfect time to address this problem and try to alleviate your current financial situation before you go into credit default.

Many consumers have trouble handling their personal finances, especially when there are debts and installments that need to be paid on time. Credit default can prove to be a very serious problem and lead to negative consequences such as loss of assets or even personal bankruptcy.

Unemployment, lack of planning or high medical expenses are among the most common situations that can lead to credit default. If you find yourself in such a situation, and have not yet missed any payment deadline, know that there are ways to ease the burden on your wallet and avoid major problems.

Find out how to maintain a good credit history and avoid the negative consequences of bad credit.
 

How to avoid falling into credit default?

During the period in which you are paying off your credit, you may be subject to situations that make monthly payments difficult or even impossible. In these cases, it is essential to seek a solution as soon as possible to avoid defaulting and seeing your name registered on the Bank of Portugal's Blacklist.

The consumer has at his disposal several possibilities that can help him avoid bad credit, with institutions that can provide support in cases of this kind. We highlight the following:
 

1. Instituto de Emprego e Formação Profissional (IEFP)

This option may be the most appropriate if you are unemployed and your priority is to replace income so that you do not miss any credit payments. You must be registered with the Instituto de Emprego e Formação Profissional (IEFP) in your area of residence and fill out the proper documentation to apply for unemployment benefits. If you are entitled to this support, you may be able to use part of it to help pay your credit payments.

However, you should know that in order for your IEFP registration to remain valid, you will have to comply with a set of duties so that your income is not cancelled. All the information about rights and duties will be provided by the IEFP when you validate your registration.
 

2. Serviço Nacional de Saúde (SNS)

If the reason you are having trouble making the payment is illness, you can contact the Serviço Nacional de Saúde (SNS) and find out what support you are entitled to, for example, in the co-payment of medication and treatments.

There are different state co-payment scales, ranging from 15 to 90%, depending on the therapeutic indications of the medication and the presence of certain pathologies. You can make this request through your personal area of the SNS 24 portal.
 

3. Plano de Ação para o Risco de Incumprimento (PARI)

PARI is a document created by the financial institution that explains the internal procedures to be adopted to avoid reaching a default situation.

This plan can be activated by the bank or by the client, and is a preventive measure, since it monitors the evolution of each client's specific credit situation.

In PARI you will find

• Procedures for monitoring the execution of contracts;
• Alarm signals for the deterioration of the client's financial capacity;
• Contact deadlines after the risk situation is detected;
• Proposals for solutions to avoid reaching a situation of default.
   

4. Procedimento Extrajudicial de Regularização de Situações de Incumprimento (PERSI)

Another option may be PERSI, the Out-of-Court Procedure for the Regularization of Defaults. This is an internal, out-of-court settlement, as the name implies, that tries to prevent a default case from going to court.

While PARI is a preventive measure, PERSI is reactive, and is triggered when there is already a default situation.

This procedure identifies the cause of the default and reassesses the customer's financial capacity in order to present other proposals for settling the debt. While the negotiation is in progress, the banking institution cannot terminate the credit agreement or take legal action against the customer.
 

5. Consolidated credit

If you have more than one loan in your name, you can opt for a credit consolidation. By grouping all your debts into one, you can have only one monthly payment, lower than the previous ones, and increase the credit payment period.

This may be the best solution to make it easier for you to reorganize your personal finances and avoid falling into default.

Also consider that the maximum age to apply for credit consolidation is 75, and that you will need a guarantor or some collateral to present to the bank, such as a mortgage on your house, for example. However, be sure to discuss the necessary conditions with your bank or financial institution, as conditions and requirements may vary from institution to institution.
 

6. Credit transfer

If, for example, you have a mortgage you can choose to transfer it to another financial institution, since there is no obligation to remain loyal to the bank that granted you the credit.

Through a credit transfer you can get better conditions for your specific case from another entity, or even extend the credit payment period.

If you really intend to make the transfer, you should inform your bank 10 working days in advance, which will have the same period of time to communicate all the data and documents concerning your credit to the new entity. After the exchange of information is completed, the process should be able to move forward.
 

In short, avoiding credit default is critical to maintaining the good health of your finances and achieving a good credit history. To do this, it is important for consumers to be aware and proactive in managing and planning their finances.

How? By creating realistic budgets, carefully (and regularly) monitoring their expenses and negotiating with their creditors whenever possible to ensure the best conditions for their particular case.
 

The Domusvenda Group works with a wide variety of service providers and has a solid network of specialized companies with many years of experience in the Distressed Assets market.