
What Are Non-Performing Loans (NPLs)?
2 May 2023
If you’re wondering what an NPL actually is – then you’ve come to the right place. NPLs stand for non-performing loans. A standard loan becomes an NPL when borrowers stop...
Read Full Story16 December 2022 • 3 min read • by Tom Miskelly
Post-2008, there was a massive surge in the number of ‘bad’ loans being sold to vulture funds by Banks. This was particularly prevalent in holiday hotspots i.e. Spain and Cyprus, where houses were often mis-sold at inflated prices. Now, we are seeing another jump in loan sales as property owners once again struggle to maintain mortgage payments.
Unfortunately, the past few years have seen a recent resurgence across the continent as banks seek to ‘clean up their act’. Many of you reading this may, at some point, receive a letter out of the blue, about a mortgage you had long forgotten about.
This can be a scary experience, and there is a great deal of misunderstanding and misinformation around this subject. We have been dealing with these funds for 10+ years, and we understand how they work, and their motivations. We want to share this expertise with you to help you reach the best outcome.
Simply, vulture funds are 3rd Party companies that buy ‘distressed’ loans from banks. They are often large, multinational companies with major resources at their disposal.
Although this might not sound that concerning, there are several key differences compared to traditional lenders:
These companies buy debts for less than their value e.g. €100,000 bought for €20,000. This means they are willing to put more time and effort into recovering money owed. In general, vulture funds are also more aggressive in their techniques, often using threatening letters, emails and calls to intimidate borrowers.
For the same reason as above, these funds are extremely hard to negotiate with as they have less to lose. We are able to settle with these companies as we have experience and understand how they operate.
When a loan is purchased, any previous agreements are cancelled. This means that vulture funds can demand larger monthly repayments or more likely, that you repay the entire loan. They can also add interest, additional costs and legal fees.
As these companies operate across Europe, or even across the world, they are much better at chasing debts across countries. They are also much more efficient than the banks as their only role is to recover money. Although you may have thought your mortgage was in the past, they could still come after you in the UK or Ireland.
Loan sales can be for a variety of reasons & can happen to anyone. Most commonly, banks sell loans that are too difficult to recover. By selling it on to a vulture fund, the bank avoids a potentially long and drawn-out process.
There does not need to be any reason given however, a loan sale is more likely if your mortgage is seen as ‘delinquent debt’. This is usually due to arrears, bad mortgages etc.
As we said, loan sales are on the rise again as banks seek to ‘clean up’ their loan books. This has been compounded by the fact that more people are struggling to pay mortgages due to loss of rent etc.
Firstly, don’t panic. Although a threatening letter or call can send you into a panic, it isn’t the end of the world.
There are options available, but it is important that you don’t try to ignore the issue, this will only make it worse. You need to be realistic, face your problems head-on and get the right advice (that’s where we come in).
Get in contact with us today to find out more about how we help. You can call us on 0330 124 1230 or email us at [email protected]
Stay tuned for part 2 of this blog, where we will be discussing what happens when your loan is sold, what it means for you and what your options are…
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