Microloans and Court-Ordered Reduction of Interest: How Lawyers Can Help Resolve Debt Problems

Microloans are a fast and convenient solution for those who need urgent financial assistance. However, their high interest rates can become a serious problem for borrowers when debt increases due to the inability to make payments on time. How can the issue of high loan interest be resolved, and what can a lawyer do to reduce this financial burden?

First of all, it is important to understand that microloans usually have extremely high interest rates, which can reach 500% or more. This situation often leads to the debt not decreasing even when minimum payments are made, causing significant financial pressure on the borrower. If you find yourself in such a situation, it is essential to seek help from a lawyer who can advise you on the steps to take to reduce the amount of debt or the interest charged.

The first step in reducing debt is negotiations with the creditor. Banks or microfinance institutions are often willing to compromise if the borrower demonstrates a genuine intention to repay the debt but, due to unforeseen circumstances (job loss, reduced income), is unable to make payments on time. This may include credit holidays or partial debt forgiveness, which helps reduce the borrower’s financial burden. Lawyers can act as intermediaries in these negotiations, ensuring that all changes are properly documented.

Another useful mechanism is debt restructuring. This is a process in which the terms of repayment are changed to more favorable ones for the borrower. As a rule, this involves reducing monthly payments or extending the repayment period. Given the specific nature of microloans, restructuring can be an optimal option for repaying the debt without significant financial losses. If the creditor refuses to restructure the debt, a lawyer can help initiate the appropriate procedure through the courts.

In addition, borrowers may consider refinancing. This is the process of replacing an expensive loan with a more favorable one. Instead of paying high interest, the borrower can take out a new loan at a lower rate and use it to repay old debts. This helps reduce the burden on the budget and makes debt repayment more manageable.

Sometimes loan agreements contain unlawful fees or penalties. If such charges exist, they can be challenged in court, and a lawyer can help reduce or cancel them. Judicial mechanisms in such cases can be extremely effective, especially if the presence of such fees or penalties violates legal regulations.

If none of these methods help and the debt continues to grow, it is possible to consider personal bankruptcy. This is a last-resort option that allows for full or partial discharge of debts, but it has serious consequences for the borrower’s credit history. It must be understood that this process can take a long time and requires detailed consultation with a lawyer, as bankruptcy may lead to restrictions on future borrowing and other legal consequences.

Currently in Ukraine, especially under wartime conditions, state support is provided for individuals experiencing financial difficulties. In particular, from 24 February 2022, a moratorium on penalties and late fees has been introduced for debtors who found themselves in hardship due to external circumstances, including the war. There are also special benefits for military personnel, allowing borrowers serving in the Armed Forces of Ukraine to receive credit holidays or avoid penalties during their period of service.

All these tools can help borrowers reduce their financial burden, but it is crucial to seek assistance from a qualified lawyer who has experience in resolving such cases. A lawyer will not only help prepare all the necessary documents correctly but will also ensure effective representation of your interests in court or in negotiations with creditors.

If you have questions about how to reduce microloan debts or how to lower loan interest, please seek clarification and legal assistance from the law firm “Strategic Advocacy.” Our specialists are always ready to provide you with qualified support in any difficult financial situation.