Payment difficulties

Payment difficulties

In case of the customer struggling with loan payments, Swedbank and Swedbank Līzings offers the following solutions:

  • Postponement of principal repayments or grace period
  • Extension of the term of agreement
  • Combining smaller loans into one bigger loan
  • Other solutions on a case-by-case basis

Grace period

As most suitable solution for customers undergoing unexpected financial distress due to the emergency situation caused by Covid-19 we suggest the grace period - the possibility to temporarily postpone loan principal repayments while continuing to pay just interest.

Things to take into account:

  • the monthly payment after the grace period will increase proportionally as this solution does not entail extension of the loan repayment period;
  • other terms of the agreement remain unchanged;
  • no fee is charged for loan amendments neither at the start, nor at the end of the grace period;
  • we encourage customers to apply in good time before the loan payments become overdue;
  • in case of job loss, customers who have the Borrower's Insurance against Unemployment and Incapacity for Work are welcome to claim the insurance benefit here.

How to apply?

To apply for grace period without extension of the term of the loan agreement, use this special application form:

Application for grace period

Grace period with extension of the term of agreement

If at the same time you also need to extend the term of the loan agreement by a period equivalent to the grace period, please fill out this application form.

Please take into account that with this solution:

  • the total cost of credit will be higher (the amount of interest you’ve paid will increase);
  • amendments to the agreement must be made and the new agreement must be signed in branch or remotely with the qualified electronic signature;
  • extension of the term of agreement is not possible for operating lease.
These grace period solutions can be applied for until 30 September 2020, 17:00 hrs. After this time or in case you’re already having a grace period that is about to end and you’re still experiencing payment difficulties, you can apply for other contract amendment solutions here - we will try to find one that suits you best.

On 29 April 2020, Swedbank joined the moratorium of the Finance Latvia Association that allows bank customers experiencing temporary financial difficulties due to Covid-19 to defer principal repayments on mortgage loans by up to 12 months and principal repayments on lease and consumer credit - by up to six months. The moratorium issued by the Association consolidates the practice already in place at Swedbank - the possibility to apply for grace period without any fee and without changing other terms of the agreement.

To find out more about the moratorium and the conditions on which customers can make use of the possibilities under the moratorium, click here.

Deferral of principal repayments on a loan is suitable in case the borrower’s or their family’s income has dropped temporarily. Such a grace period is normally granted for a period of time of 6 to 12 months, however it depends on the financial situation of the borrower.

During the grace period, principal repayments on the loan are put on hold and only interest payments are due, whereas the principal amount not paid during the grace period will be distributed over the remaining term of the loan. It is crucially important during the grace period to keep actively looking for solutions that would allow resuming performance of loan or lease obligations to full extent. Usually the grace period option cannot be used more than once.

Extension of the agreement term or repayment period can help if the borrower’s income has dropped on a permanent basis, for example, if the salary has been cut or a family member has lost their job. Extension of agreement term means that the monthly payment will decrease, whereas the loan repayment period will be prolonged.

Often, extension of the agreement term does not lead to the desired effect if the amount of obligations is large and the loan repayment period has been rather long to begin with. In such an event, the reduction in monthly payment is minor. In any event, we can look into each individual situation together.

Please contact the bank to find a solution together.

Combining smaller loans into one bigger loan may also help in situations where the borrower’s income has dropped, for example, the salary has been cut or job has been lost, and maintaining current payments is challenging. Consolidating several loans into a single one and drawing up a longer repayment schedule will reduce the existing monthly payment and the loan obligations are discharged gradually.

Please contact the bank to find a solution together.

If meeting existing loan obligations is expected to be out of reach in the long-run, switching the home or car could be a workable solution. Moving to a smaller apartment or switching from an expensive car to a more economical one will allow saving on payments for the apartment and fuel.

Money saved as a result of such a switch can be applied towards paying off a loan. This solution will also allow reducing monthly loan payments. We’d like to remind that the bank’s consent is mandatory for such deals, hence we suggest first consulting the bank’s specialists. Please note that finding a suitable solution for property switch may be time-consuming which means that you might have to be flexible and adapt to the circumstances.

If a lasting decline in income is expected, one of the solutions is selling the loan collateral (real estate or vehicle) as a way of avoiding the potential financial difficulties. We recommend starting the process of selling as soon as possible as in that case you’ll have more time and might fetch a better price. Consulting the bank before selling the property is a must.

Sometimes it is enough to sell one’s belongings to overcome temporary issues. By putting up an ad on the web or in paper you can sell household appliances or furniture and the money obtained will help you survive the difficult stretch. Take into account: selling items bought on hire purchase requires consent by the seller or the financing institution.

When all other options have been exhausted, an enforcement officer is engaged and asked to sell the property owned by the borrower. Such a solution is mainly applied in cases when the borrower or the lessor is not interested in resolving their situation and avoids communication with the bank: does not answer calls, regularly changes their phone number and place of residence, or has fled the country altogether.

In such cases, the Bank is forced to exercise its legal right as the creditor and unilaterally withdraw from the agreement, demanding early performance of obligations. The enforcement officer auctions the property as a result of which its price may be lower than the market price. Additionally, the debtor will also have to cover the law enforcement officer’s expenses which are roughly 10% of the outstanding obligations. To avoid such a scenario, we recommend contacting the bank immediately when problems with loan payments arise, that way looking for the most appropriate solution to the situation at hand together.

Pre-crisis loans are home loans which were issued prior to 31 December 2008 and were not repaid due to the economic downturn of 2008. The property mortgaged as collateral for these loans has been sold, however, this sale has not covered the outstanding commitment in full.

For several years already Swedbank has been offering customers a Social Settlement Programme, under which various solutions are sought to settle commitments.

On 4 August 2020 amendments to the Credit Institution Law took effect giving creditors the right to unilaterally write off pre-crisis loan commitments in full or in part for natural persons until 31 December 2022. The intention of the legislature is to thus return to economic circulation a part of the society, which, having failed to repay their debts, has been forced to live in the shadow economy or leave the country.

Eligibility - Paragraph 88 of the Transitional Provisions of the Credit Institution Law provides several criteria for identification of such agreements:

  1. Loan agreement concluded with a natural person.
  2. The natural person (the borrower) is not and has not been a person related to a company as defined in the Law on Taxes and Duties.
  3. The commitments arise from a loan agreement, which was concluded and took effect prior to 31 December 2008.
  4. The repayment of the commitments was guaranteed by collateral — a mortgaged real estate property.
  5. The debtor or pledgor has lost ownership of the mortgaged real estate property due to the loan commitments to the creditor (the collateral has already been sold, but an outstanding amount still remains) prior to 31 December 2018.
  6. On the date of writing off the loan, it is booked on the creditor’s accounts as a written-off asset.
  7. An insolvency procedure has not been started for the relevant natural person.
 Commitments shall not be written off - for borrowers who have an ongoing insolvency procedure.

Writing-off/writing-down of commitments - Swedbank has identified all customers who meet the criteria listed under Paragraph 88 of the Transitional Provisions of the Credit Institution Law. For the majority of pre-crisis loans, the outstanding principal amount shall be reduced by 90%, thus allowing customers to fulfil their remaining commitments in full in the foreseeable future. However, for some customers, 100% of their commitment shall be written off.

  1. Socially vulnerable groups*:

    • large families taking care of at least three children;
    • persons who have been granted the status of a low-income or indigent person;
    • persons falling into other socially vulnerable groups.

    *A certification of belonging to one of the aforementioned social groups must be submitted to the bank by 1 July 2022.

  2. Persons who will have reached pension age by 31 December 2022 as defined under Section 11(1) and Paragraph 8.1 of the Transitional Provisions of the Law on State Pensions.
  3. Borrowers who have made a Social Settlement with the bank in the form of a consumer loan. With the exception of specific settlement cases.
  4. Applicable to cases where the borrower is deceased.

Applicable to cases where the customer has defaulted on their commitment due to the economic downturn and has not found a different solution for settling the commitment.
  1. Cases where there are ongoing legal proceedings.
  2. Cases where there is a settlement in place.
  3. For customers who have acted in bad faith during the recovery process.

Important note!

Persons, who belong to a socially vulnerable group must fill out and submit to the bank a questionnaire along with supporting documentation demonstrating their compliance with any of the aforementioned criteria by 1 July 2022. Documents may be submitted to any Swedbank branch, by mail to the Swedbank Extrajudicial Restructuring Unit (Balasta dambis 15, Riga, LV-1048) or by e-mail to izligums@swedbank.lv (signed with a secure digital signature).

Persons whose commitments will be written off partially will receive a letter at their registered address of residence stating the timeframe and procedure of repaying the remaining commitment.

Questions and answers about granting postponement of principal repayments (grace period) for private customers.

To return to the previous payment arrangement, you need to send a message to the bank in free form on the Internet Banking site, choosing subject “Loans”, specifying from which month you’d be ready to resume loan principal repayments. Our specialist will provide further guidance within 3 - 4 business days. Also, no fee will be charged for ending the loan holiday just like in case of applying for loan holiday.

Please note that amendments to the agreement must be signed at branch or remotely by qualified electronic signature.

  • Mortgage loan – in section “Mortgage loan” choose “Fill in application”, specify “Changes in loan agreement in case of payment difficulties” in the field “Loan purpose”, and fill out the rest of the application fields.
  • Consumer financing products - go to “My obligations” and select “Changes” > “Other changes” next to the respective loan or, alternatively, fill out the loan application and describe the situation in the section “Additional information”.
  • Leasing - by sending the bank a message via Internet Banking.

The amendment formalization process will be made easier for the customer and no fee will be charged for this service.

The solution is open to all customers have not had difficulties with making loan payments up until now but are facing such as a result of current economic situation (for instance, decrease in regular income or job loss).

Yes, the grace period solution also applies to car lease and consumer financing products (incl. the small loan, car loan, home small loan, study loan without the state guarantee, study and student loans with state guarantee).

The term will not be extended but the unpaid amount will be spread over the entire remaining payment schedule.

The monthly payments will increase by the amount of the principal not paid during the grace period, as divided by the number of months remaining until the end of the agreement.

In issuing loans, the bank has a duty to make sure of the customer’s capability to assume financial obligations. When you apply for the loan repayment holidays, you need to fill in an application form to enable the bank to duly assess the customer’s situation and offer the most suitable solution. With a view to ensuring that the suitable solution successfully helps overcoming temporary difficulties wih loan payments, the bank will re-assess the customer’s situation once in three months and, if necessary, will get in touch with the customer.

Applying for the grace period will not cause the existing interest rate to be revised. Interest will still be calculated on the remaining balance of the loan. The balance of the loan will remain unchanged for the entire period of the grace period.

You need to apply for the grace period at the moment when you have substantiated concerns about payment difficulties.

Our suggestion is to choose grace period for 12 or at least 6 months. The principal repayments can also be resumed sooner if the customer wishes so.

No, you just need to fill out the application.

The insurance against unemployment must have been valid for at least 90 days before the unemployment occurs.

Extension of the repayment period is possible but availability of such a solution is decided on a case-by-case basis.

Depending on the situation, there are several ways how we try to help customers struggling with solvency:

  • postponement of principal repayments,
  • extension of the term of agreement;
  • combining existing smaller bank loans into one bigger loan;
  • Other solutions on a case-by-case basis.

Additional information