The covid, inflation and the rate hike have left many on the brink. The Bank of Spain estimates that some 770,000 families do not cover their essential expenses –basic needs such as food and housing– with what they earn in the month and what they have available in the bank. Between mortgages, rents, bills and other expenses, month after month the same dilemma looms: what can you stop paying or where do you have to cut?
For Patricia Suárez, president of Asufin, the priority is clear. The mortgage should be the first thing to attack, since it is what has the most weight. “Many take away everything except the mortgage. But in services, if you don't pay, they cut off your supply, and with the loan, the bank opens up to negotiate, ”she says. “When a family stops paying the mortgage, in 98% of cases the bank is open to seeking a solution. It is better to start at home, ”she continues. In general, this dialogue does not start until default, "because while you pay the bank considers that you have room to take other things away from you." Now the client also has extra protection with the codes of good practices agreed between banks and the Government.
The issue does not have a single alternative. Oriol Roa, director of the Unió de Consumidors de Catalunya (UCC) points out that for temporary terms the mortgage offers more margin of non-payment, with 12 installments (or 3% of the mortgage in the first half of the repayment term) before the foreclosure process is activated. "But the late payment interest is large," he warns.
Opt for other ways. In services such as electricity, water or gas, non-payment offers a margin of two months until the cutoff, but if you go to the social services and obtain a vulnerability certificate, there will be no suspension of service. In telecommunications, if the fixed telephone is not paid, as it is considered a basic service, the cut will not be immediate, with another two months to spare. “Housing is a high expense and non-payment of the larger amount can lead to more problems. First you can opt for non-payment of basic supplies or telephony. The savings are smaller, although that still makes a difference...
Non-payment is not harmless. When considering what to do, there is one figure that stands out. They are debts greater than 50 euros that mark the barrier for an individual to enter a list of defaulters. "Even if the amount defaulted is not very high, the consequences can be important," says Santiago Casado, Intrum's director of non-performing loans (NPL) business. That our name and surname appear there makes it difficult to access loans, mortgages or a supply, he exemplifies.
A recent Intrum study found that 24% of Spaniards will fail to pay a bill this year to ensure more important items, such as housing. The first to stop being covered would be online shopping bills, internet and telephone expenses, it was detailed. “Whenever possible, non-payment of any type of invoice must be avoided, it is the beginning of a greater debt and with various consequences. Collection of interest, penalties, suspension of service, lawsuits...”.
In order not to default, then, you have to act beforehand. “It seems a truism to say that the way for income to cover expenses is by strictly controlling them, but it is the only way,” says Luis Javaloyes, CEO of the fintech brokerage Agencia Negociadora. Financial order calls it. When it comes to scissoring, the first thing is “non-fixed expenses, such as leisure –cinema, restaurants...–”. Then you have to attack the dispensable of fixed expenses, such as subscriptions to platforms -such as Netflix- or the gym. The last way out is to reduce spending on food and clothing.
The moment of desperation can lead to financing a debt that is not covered on credit. "It means multiplying the interest paid," warns Javaloyes. For example, the rate of 3% of the mortgage can be converted into 25% if the card is drawn. "Financing debts with credits can be a short-term solution that implies a bigger problem in the future, since there is a risk of not being able to assume the quotas of the new financing either," Casado explains. “Most get more into debt, it can make it worse. You can enter a spiral that is crazy ”, launches Suárez.
