In this article, i will help you to find detailed information about the topic as what happens if someone defaults the personal loan.
A Personal Loan is provided on credit for a short period. A personal loan usually is taken to fulfill the short term requirements such as marriage, renovation of home, vocation, or to pay off the existing debts.
Personal Loans will be applied when an individual has a requirement of a significant amount. Most of the cases nobody likes to take a personal loan if they have sufficient money in their savings bank account, Fixed deposits, Cash in hand.
Especially the personal loan is choosed when a person unable to acquire a large amount at a time.
Once a person received the loan amount in his bank account, the responsibility of the repayment will start. Most of the time, banks and NBFCs or irrespective of the lender, they prefer to lend the amount to the person who can repay.
The primary priority of every lender is to get back the lending amount with interest.
Below are things that will be happening on the default of the personal loan.
Penalties and Late payment Charges or Fees for Defaults the Personal Loan
If a person defaults the EMI banks levy a massive rate of interests and late payment fees with the GST (Goods and Service Tax).
The one can’t assume the late payment fees. For every missing EMI, the late payment fees will pile up for every EMI.
Effects CIBIL Score
If someone defaults the personal loan the effect hit the CIBIL then after someone goes to any credit, they will treat as defaulters and banks rejected the loan applications. So it is essential to having and maintaining a healthy CIBIL score which is the primary factor that only helps a person to judge his past credit history.
Continuous Calls from Banks
Banks send reminders about the payment date and EMI amount with email or SMS. If a person skips the EMI banks start calling the borrower to repay the EMI. If a person does not answer, there is no limit for banks for phone calls. Its very frustrated to someone about receiving tens of phone calls in a day.
For non-payment of the personal loan, EMI for two months, banks will send their executives to home, and you will get contacted with the collection agencies.
If the case is extreme lender may file a legitimate lawsuit in the local court, in this case, if the court order is against the borrower, in this case, jurisdiction orders to sell assets or prison.
On the other hand, the lender may not have any use for imprisonment. the ultimate goal of any lender is to get back the loan amount.
Loan seeker will become as a defaulter
If a person does not have a regular income to repay the loans or debts will be treated as a defaulter in this case banks propose for the waiver of late payment fees and ask to pay the remaining due amount.
On the other hand, the borrower may only have the chance to sell his assets or the other option is to consolidate the loan amount.
Consolidation of loan means that a person has defaulted another loan too, consolidators will communicate with the lenders for reducing of the loan interest and increasing of the loan tenure.
Precautions and Measures to be followed for the defaults of the Personal Loan
If it is there a default the personal loan, the following things will help the individual to escape from the massive loss.
- If you are in a situation where there is no income or money to repay the large amount for the specified time, call the lender to extend the payment date.
- If the collection agent of the bank will come to your address, go and talk directly and explain the situation. Then they might give you the time for the repayment or part payment of the loan.
- If you are in where you are not able to pay the loan, then they will come to a settlement to pay off the certain percentage like 80% of the loan amount.
- Tightening your spending will help to pay off the amount of the loan.
- If the loan amount is write off, ask the lender to give the option to pay the remaining amount in installments.
- Dont apply for the new loan to pay the existing due amount.
- I recommend you to look for the options that will help you to pay off the loan because it will affect financially and mentally.
- Evaluate all the choices like pledging the assets may help to escape from the situation, but its not suggestable.
One moral is always works that is
Prevention is important than a cure.
which is the best example which applies to every individual
When taking a personal loan, it is vital to consider the few things.
- Choosing the required amount
- Assessing the ability of the repayment
- Selecting the number of EMIs as per income.
While applying for the personal loan, assess the requirement and necessity of the personal loan. If you think it is not essential dont go for it.
Choose only the required amount.
If you borrow more than the necessary amount, there might be chances that the extra amount will become an unnecessary expense. It would be best if you remembered that every single rupee you borrowed would need to repay with interest.
Choosing less number of EMIs will affect the borrower to pay more interest. Still, the income of the individual is less; it is good to select the higher number of EMIs because there will lower chances for non-payment of the EMIs.
Hence it is not suggestible to defaults the personal loan it will affect more and more which you can’t expect
I am Ram, I have completed Master of Commerce, I am Finance writer and Personal Loan Advisor in Personal Loan Xpress. I love to write finance articles and i consult the people regarding their financial decision with my Expertise.