What to do If a borrower doesn't pay back their loan

The loan market in the Philippines is booming. In 2022, the total loan volume reached PHP 10 trillion, up from PHP 5 trillion in 2017. This growth has been driven by a number of factors, including the increasing number of Filipinos who are underbanked or unbanked, the growing popularity of online lending platforms, and the government's efforts to promote financial inclusion.

As the loan market has grown, so too has the number of borrowers who default on their loans. In 2022, the total amount of non-performing loans (NPLs) reached PHP 1 trillion. This means that for every PHP 100 that is lent, PHP 10 is not repaid.

What to do If a borrower doesn't pay back their loan

If you are a lender and a borrower has defaulted on their loan, you may be wondering what you can do to get your money back. Here are some legal options that you have

Sue the borrower in court

‍This is the most common option for lenders. If you win the case, the court will order the borrower to pay you back. However, this process can be time-consuming and expensive.

Garnish the borrower's wages

If the borrower has a job, you can file a garnishment order with the court. This will allow you to take a portion of the borrower's wages until the debt is repaid.

Take possession of the borrower's collateral

‍ If the borrower has pledged collateral, such as a car or a house, you can take possession of it if they default on the loan.

Report the borrower to the credit bureaus

‍If the borrower does not repay the loan, you can report them to the credit bureaus. This will damage their credit score and make it more difficult for them to get a loan in the future.

It is important to note that the legal options available to you will depend on the specific terms of the loan agreement. If you are unsure of your rights, you should consult with an attorney.

In addition to the legal options listed above, there are a number of other things that you can do to try to get your money back from a borrower who has defaulted. These include:

• Contact the borrower and try to work out a payment plan: This may be your best option if the borrower is simply experiencing temporary financial difficulties.
• Offer the borrower a settlement: This may be an option if the borrower is unable to repay the full amount of the loan.
• Forgive the loan: This may be an option if the borrower is unable to repay the loan and you are not able to collect it through other means.

If you are considering forgiving a loan, it is important to weigh the pros and cons carefully. On the one hand, forgiving a loan can help to improve your relationship with the borrower and may even lead to future business opportunities. On the other hand, forgiving a loan can also hurt your financial bottom line.

Ultimately, the decision of whether or not to forgive a loan is a personal one. There is no right or wrong answer.

If you are struggling to get your money back from a borrower, you may want to consider using a loan comparison tool like loanonline.ph. Loanonline.ph can help you to find the best loan for your needs and situation.