How to cope with loan stress

Mr Patrick Opio found himself between a rock and hard place after defaulting on a loan. 
In January 2019, a bank loaned him money that he used as a top-up capital [in addition to his savings] for starting an Internet café integrated with a printing and photocopying business.

As the business kicked to life, Covid-19 struck, shutting down the country and the world.  
“Work stalled after the government advised all of us to minimise movements and stay home as a way of controlling the spread of the deadly virus,” Mr Opio said in an interview for this article. The lockdown directives slowed down work and dragged the nascent business to the cliff edge.

Even after the economy fully reopened, nearly after two years, in January 2022, Mr Opio’s business struggled to regain life.

Left with no option, the bank stepped in and informed Mr Opio they would auction his collateral so as to reclaim their money.
“I recall begging and pleading with the bank officials to give me more time, but they said the decision was beyond them as the bank needed to recover its money,” he said.

What befell him afterward was painful.  

“I slipped into a terrible depression following a diagnosis from a doctor after a hospital visit. I developed terrible mood swings and when the sadness overwhelmed me, I would sometimes hide in my marital bedroom to cry,” he said.

On other days, the depression forced him to stay indoors and not go out for days.
“It was a very gloomy time,” Mr Opio admitted.

Depression is a common illness worldwide, according to the World Health Organisation (WHO), where victims are easily saddened, irritable and feel emptiness.

Other signs include loss of pleasure or interest in activities, for most of the day nearly every day, the UN health watchdog noted on its website.

But it is not all gloom because depression can be better managed if detected and professional help sought early.

Available treatment options, subject to the severity and pattern of depressive episodes, include behavioral activation, cognitive behavioral therapy, interpersonal psychotherapy, or antidepressant medication.

Mr Opio, the 48-year-old father of two, said he is doing much better following sustained counseling by his doctor, wife, and other close family members.  

Expert take
A financially-distressed person has higher likelihood to live in denial, be easy to annoy or experience higher anxiety, according to Mr Ali Male, a counseling psychologist at A-Z Professional Counseling and Support Centre in Kampala.

“Such [a situation] can leave you feeling angry, ashamed, or fearful, fuel tension and arguments with those [even] closest to you, exacerbate pain and mood swings, and even increase your risk of depression and anxiety [a feeling ofuneasiness],” he said.  

In some cases, Mr Male adds that individuals may resort to unhealthy and escapist coping mechanisms including abusing drugs, drinking alcohol, and gambling.

No matter the feeling of hopelessness, the counselling psychologist implored individuals who find themselves in a corner of bother over money matters to openly discuss theirworries with a trusted party - family, relatives, professionals, workmates or church or club members - able to avail help.

“Talk to your spouse or others about the situation. There is no shame attached to being in debt,” Mr Male said.

He also recommends having an honest and open discussion with banks on rescheduling options andhaving smaller payment plans. 

Mr David Kavuma, a counseling psychologist at Mildmay Uganda, said prospective borrowers should undertake due diligence on loan before picking it.

“Take the initiative to get enough information before acquiring the loan and acquire one that is within your means [of repayment],” he said.

Mr Kavuma said borrowers should from the outset not expect banks, which are businesses with obligation to file profits and dividends for shareholders, to sympathise with them when they default.
Instead, a lender, he said, will do all in its power to recover its money. 

Mr Fred Muhumuza, an economist, argued that some of the reasons why businesses and individuals are failing to pay loans and losing property to lenders, is rising problems due to post-Covid economic distresses. Some of the problems, he noted, are beyond an individual’s ability.

“We don’t only want to look at the micro level, on what businesses have done wrong, but we also need to look at what the government has not done to set up a resilient economy,” Mr Muhumuza said.

Shortly after lockingdown the country in March 2020 over Covid-19, the government through the Finance ministry announced a raft of measures to mitigate the effects of pandemic on the economy, including stimulus package for distressed businesses.

Following a survey it did at the peak of the lockdown and containment measures, the Economic Policy Research Centre (EPRC) projected that the first six months of lockdown were likely to push 3.8 million workers into temporary joblessness and 600,000 out of employment permanently.

Because the lockdowns of March 2020 and of June 2021 lasted longer than predicted, their effects on individuals, families, private sector and even the government turned out more adverse than projected.

Worse, the government’s initial Shs1 trillion stimulus package was nowhere to be seen, as the would-be largest distributor, the Uganda Development Bank (UDB), told this newspaper that it had received no transfers by April last year for the purpose. 

The procedure for access remained opaque, raising concern among parliamentarians.
 It is such false starts and the bigger picture that Mr Muhumuza referred to, although some borrowers run into trouble due to wrong business decisions.

Mr Davidson Madira, the investment advisor for Uganda Land Owners Association (ULOA), said some of the foreclosures happen due to the ignorance of borrowers.

“If you get a loan and fail to pay it back on time, the best option is going to the bank and request them to allow you to sell off the property [loan security] and pay back their money. The law allows it,” he said.
He added: “People think the bank has the first right to sell off their property. You can personally sell off the property and pay the bank their money and take the balance, but some people start hiding away from the bank because of ignorance.”

Then, if one can afford the services of a financial adviser, counselor, or therapist, the experts added that people should proceed to reach out to them.

Mr Madira pointed to the scarcity of good business advisors, which leads defaulters to commit additional mistakes in evading loan liability.