If you’ve ever wondered what happens to unpaid loans after people stop paying them, you’re not alone. There’s a whole world built around those loans – and it’s called non-performing loan (NPL) management. It’s a business that’s part finance, part psychology, and part legal hustle. And right now, Spain’s NPL market is quietly becoming a hot spot.

Let’s break it down.

What is the NPL Business?

NPL stands for non-performing loans – loans that haven’t been paid back as agreed. When banks can’t collect, they offload the problem to someone who can. That’s where NPL managers step in.

How It Works

First, banks or financial institutions sell these unpaid loans at a discount. The buyers – often asset managers or financial firms – assess the portfolio, factoring in collateral (like property), the borrower’s situation, and chances of getting the money back.

Next comes the servicing and collection phase. This might mean calling borrowers, offering to restructure payments, or settling for a lower amount. Sometimes, legal action is involved – foreclosures, asset seizures, the works.

If all goes well, the buyer recovers more money than they paid for the loans. That’s the core of the business model – buying low, recovering higher, and pocketing the difference.

The Process of Acquiring NPLs

Acquiring NPLs isn’t just walking into a room and making an offer. It’s a structured bidding process, and yes, it’s competitive.

How a Typical Deal Unfolds

First, a bank decides it wants to offload some bad loans. They package them into a portfolio and announce a sale. This could be public or shared with a closed group of potential buyers.

Interested buyers then perform due diligence – digging into the data: borrower profiles, collateral, recovery history.

After that, initial bids go in. These can be all-cash offers or structured based on how much the buyer thinks they’ll recover. Sellers review, shortlist, and sometimes negotiate terms with final bidders.

Once a deal is struck, ownership of the loans transfers to the buyer. They take over management, try to collect, restructure, or pursue legal remedies – whatever gets the job done.

What’s Going On in Spain?

Spain’s NPL scene has come a long way since the financial crisis. And while the worst is behind, there’s still plenty of activity.

Where Things Stand

Spain’s NPL ratio is down to 3.43%, the lowest it’s been since 2008. That said, it’s still about twice the European average – which makes it attractive for buyers looking for under-the-radar opportunities.

Since 2008, banks have offloaded around €263 billion in bad debt, cleaning up their balance sheets and shifting the focus to smaller, more competitive portfolios.

What’s Moving Now

In 2024, most Spanish NPL deals fell between €10–100 million – not blockbuster numbers, but significant. One big trend is the rise of unsecured NPLs – loans with no collateral. High interest rates and affordability issues have pushed more of these into the market.

Residential mortgage NPLs are still active thanks to Spain’s robust property market. At the same time, there’s growing curiosity about re-performing loans (RPLs) – loans that were once bad but are now paying again. Think of them as comeback stories.

Spanda Capital’s Positioning in the Spanish Debt Purchasing Market

Spanda Capital is well-positioned to engage in small to medium-sized debt transactions within the Spanish market. A commonly observed trend is that these deals often fall into a unique gap—large market players typically find them less attractive, reducing competition from major debt purchasers, while small family offices often consider them too large to manage effectively.

This strategic positioning allows Spanda Capital to capitalize on opportunities that are underserved, securing advantageous transactions with less bidding pressure while ensuring efficient portfolio management.

Expanding Opportunities in the Spanish Debt Purchasing Market

In addition to Spanda Capital’s strong positioning in small to medium-sized transactions, large debt sellers have begun dividing their extensive portfolios into medium-sized sub-portfolios. This approach enables multiple purchasers to acquire different segments, creating new opportunities for Spanda Capital to participate in larger transactions by selectively bidding on individual sub-portfolios.

This market shift further strengthens Spanda Capital’s ability to secure valuable assets with reduced competition, ensuring strategic acquisitions that align with its investment objectives.

What’s Next

No major fireworks are expected, but steady activity will continue. Banks prefer smaller, targeted portfolios to attract more bids. Expect ongoing interest in residential, unsecured, and SME debt, and more creativity in how these assets are worked and recovered.

Final Thoughts

NPL management might sound like cleaning up someone else’s mess – and it kind of is. But it’s also a business built on strategy, patience, and risk control. Spain’s market, in particular, offers a lot of angles – especially for those looking to understand how claim rights and real-world assets come together.

Whether you’re new to the topic or exploring ways to diversify your exposure to alternative asset classes, NPLs are worth a closer look. Just remember: behind every bad loan, there’s usually a story – and sometimes, a second chance.