When the borrower fails to repay the loan or interest on time as agreed in the contract, the lending institution may bring a civil lawsuit to the court according to relevant laws and contract provisions. The prosecution process mainly includes the following two parts:
1. Preparation materials: Before preparing for prosecution, the lending institution needs to collect and sort out evidence materials related to loans, including but not limited to contracts, payment records, communication records, etc. These evidences will help to prove that the borrower has violated the contract.
2. Submit an application. The lending institution submits a civil lawsuit application to the relevant district court through a lawyer's representative or an internal legal team. The application shall state the facts and requests of the case in detail and submit the necessary supporting documents.
Since it can be levied by means of prosecution, is the prosecution effective? Lending institutions can deter future borrowers by suing borrowers. Other borrowers are more cautious in fulfilling their contractual obligations and reducing the risk of default when they know that they may be sued. Through court decisions and enforcement procedures, lending institutions are expected to gain recourse against borrowers. From a legal point of view, this means that lending institutions can force borrowers to repay debts or seal up or auction collateral to recover losses. Moreover, once a lawsuit is filed and the lender wins, it will leave relevant records and affect the borrower's credit record. This will have a negative impact on its future loan application and credit rating.
It is worth pointing out that although prosecution is one of the effective collection methods, its effect is also affected by many factors. For example, if the borrower has financial difficulties and is unable to pay off the arrears, even if the lawsuit is successful, the actual amount recovered may still be limited. In addition, the prosecution and execution in judicial proceedings also need corresponding time and expenses, including attorney's fees and legal fees.