Talk to your bank when struggling to repay your bond

There is a regrettable tendency among those who struggle to meet their bond repayments to keep silent about their problems until it is too late to carry out an effective rescue exercise.

Situations of this kind, says Tony Clarke, Managing Director of the Rawson Property Group, can be avoided if the struggling bondholder would just talk to his bank and make a provisional new deal.

"The Rawson Property Group's bond origination division, Rawson Finance, reports that the banks, almost without exception, have been willing to help struggling bond payers provided that there is some indication that they will recover their ability to repay within the foreseeable future", said Clarke.

Although it is highly unlikely that the bank will reduce the bond interest rate they originally negotiated, adds Clarke, they have shown themselves willing to allowing the bond holder to pay the interest only for a specified period and/or to extending the repayment period, thereby reducing the monthly payments.

In certain cases, says Clarke, the banks, if approached early enough, i.e. before the bond payer has fallen behind on his payments, have been willing to carry out a debt consolidation exercise in which they actually increase the amount of the bond and assist the client to pay off hire purchase and personal loans taken out at high interest rates.

A consolidation of this kind, says Clarke, can reduce the client's monthly pay-outs because the interest rate on the bond is so much lower than that of most short term loans. However, in such cases the client is almost always forbidden to take out any further loans of any kind for a stipulated period - even signing on for a new store account or credit card is forbidden.

"As has been said time and again", said Clarke, "the banks are not at all keen on repossessing properties and regard this very much as the last resort. The process takes up a great deal of administrative time for very little reward as the properties very seldom sell at their true market price, which can cause further repayment problems."

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