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When A Borrower Fails to Repay the Loan!

By: f2cpvtltd

Taking a loan or financial aid has become fairly easier and less of a headache these days but one thing that hasn’t is the struggle and efforts to pay back that amount. In this capital-driven world, a need for money can arise from anywhere and for anything be it from purchasing your dream car to the responsibility of having your own house, an urgent medical expense, or a new venture. Nowadays with the coming of new policies offered by banks and money lending companies borrowing and returning has become very convenient and a part of our daily life. The lender charges a certain amount of interest so as to earn small benefits for providing the financial aid and the borrower pay the loan amount in the form of monthly installments called EMI over a period of time which could vary depending upon the type of loan and the amount taken.

In all of this Payback of a loan can be an enduring process though it gives you the freedom of making life-affecting decisions then it also dictates certain aspects of life and demands one to live towards a stable so as to ensure that he/she is able to pay the regular EMI without any issue. But as unpredictable life is one might find themselves in a situation where they are unable to pay for the loan that they have taken. There could be countless personal and professional reasons for that but in the end money matters and in one way or another has to be paid back. So, what happens if someone is not able to pay the EMI’s or the whole remaining amount taken as a loan? What are the steps that the bank can take? And what can you do as a defaulter?.

Through this, we will explore all these questions and try to help those who might face this issue and help them make an educated decision depending upon the situation.

Keep Bank up to date

As you might have noticed that the bank usually sends you a reminder whenever you approach your EMI dates and constantly urges you to pay them ASAP. This is the bank’s way to ensure that you get the information and avoid any undue penalty or late fee. Also through this, they can hold their end of the bargain. In case you are not able to pay the amount and skip a month the bank will also notify you constantly of the delay you have made and will continue to do so until they get a response from your side regarding this delay. Giving you the benefits of the doubt the lender will assume that you might have forgotten or maybe had some other issues due to which you might have missed the deadline but only for a small duration. After a period of 90 days, the lender is liable to take legal action against you for now paying the agreed-upon EMI. The lender can send you a legal notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. This notice is an order to the borrower to pay back the EMI without any further delays. Even if then the lender gets no response they can declare the account of the borrower an NPA( Non-performing asset) which is not the most viable option and can deeper the roots of your problem. The best option, in that case, is to have a direct and honest conversation with your lender regarding your current situation rather than running from it and try to figure out the best possible option which can be followed by either giving a relaxation on your EMI amount or giving some time to ensure you have financial stability and can resume after that, announcing bankruptcy should be your last resort and be avoided as it may result in cease of all your personal valuable assets.

Can have long-lasting consequences

As you might find yourself in a tricky situation there are some other issues that might have lined up for you in the future, if you a user of a credit card or take small personal loans you might be familiar with the credit card score which is maintained by a credit score institutions such as the CIBIL which contains all you credit records and history of payback. In case of being a defaulter and not being able to pay the amount, you can find your credit score take a major hit and can fall down tremendously which would reflect upon as a report card to any lender you may approach in the future for any type of loan. These days most of the lending companies see your credit card score as an important factor while considering an application for a loan and with the history of being a defaulter and someone who often finds themselves unable to pay EMI’s then this would significantly decrease your chances for securing a loan. In case if you provide solid grounds such as heavy collateral as a guarantee which the bank can seize in case of failure then you might be able to get a loan but it might come with a higher interest than those with a better credit score than yours.

Losing personal valuable assets

This situation arises as a last resort for both the lender and the borrower when the bank after seeing upon the failure in returning the borrowed amount and with the future of not being able to pay back either the amount or in form of EMI’s. The bank takes over the case and seizes every personal asset that the borrower owns in hopes to sell or auction those assets in order to recover the amount that needs to be paid. Depending upon the type of loan the bank can take necessary actions like taking over the property or house In case of home loans, in case of automobile loan they can take the vehicle itself and In case of personal loan where the bank might now have anything to sell in order to get the money, they can take legal action against you that can lead to time in prison.  To avoid the worst-case scenario one might go for a debt consolidation loan which means that to take a bigger loan to get rid of all other small urgent loans that need to be paid in that way it’s easier for you to focus on just one loan but for a longer duration, though keep in mind that the EMI’s and the interest rate on the new loan should be less or at least appropriate than the previous ones.

With a situation like these, one might feel like being stuck but it is important to understand that taking positive action and quick response is the only way to get yourself out of these situations and to make sure that you don’t repeat those previous mistakes and lead a more financially stable life. Best of luck in your future endeavors.

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