Loans are short or long-term financing options offered by various financial institutions to help a borrower meet their various financial obligations. Lending organisations offer the credit to an individual in lieu of an assurance that they will repay the principal amount along with interest by the end of loan tenor.
However, certain situations may leave an individual in a position when they are unable to pay personal loan EMI. While a defaulting will affect the borrower’s financial history, there are certain things they can do to cope with the situation and prevent further financial implications.
Things to do in Case of Payment Defaults –
1. Opt for Debt Consolidation – Debt consolidation is one of the most common methods to tackling missed personal loan EMIs. Debt consolidation can lead to a lower EMI as the borrower is paying interest on one line of credit instead of multiple different debts.
A borrower can avail a debt consolidation loan if they are unable to pay personal loan EMI. They can calculate their eligibility criteria with the help of an online personal loan eligibility calculator.
2. Improve Income – A borrower can explore paths to increase their monthly income or reduce overall expenses if they fail to pay their loan EMIs. Cutting down unnecessary expenses can significantly improve one’s overall budget and help them repay the loan EMI.
3. Liquidate Assets – Liquidating assets to gather finances and repay an existing debt is a great option for individuals who have any unused movable or immovable properties. A borrower can even resort to liquidate their investments if they are unable to pay personal loan EMI.
Some investments like fixed deposits allow an individual to take a loan against the money as a secured credit. It can be utilised to provide the necessary finances to repay existing debt.
4. Refinance the Debt – Refinancing replaces the existing debt by paying off the due with another credit. The new loan should offer better terms and features for the borrower to improve their finances. Another personal loan from a different financial institution may help refinance the debt as these advances do not come with any end-use restrictions.
Several financial institutions offer such credits with an affordable interest rate, flexible tenor, and various other borrower-friendly features and benefits. Companies like Bajaj Finserv even provide pre-approved offers on personal loans, business loans, secured credits like home loans and a range of other financial products.
Such offers help you save time by simplifying the process of availing finance. You only have to share some essential details online to check your pre-approved offer.
5. Loan Settlement – Loan settlement waivers are the difference between the paid and due amount often offered by lenders as a beyond-the-table settlement of the advance. However, it is not recommended as one’s credit score will take a serious hit if they opt for a loan settlement.
What happens if a Personal Loan is not paid in India?
A financial institution holds certain rights with which they can recover the amount if a borrower defaults on a personal loan. Specific legal actions against loan defaulters can be pursued by a lender.
Additional Read: Personal loan closure process
A borrower will be declared as a Non-Performing Asset if they default for 90 consecutive days. In this situation, they will be barred from availing another credit in future. However, if he or she pays the dues in time, the financial institution may consider the situation as a genuine crisis and work towards a resolution.
Overall, the loan recovery process can be a lengthy stress-full process which one should always try to avoid. The repercussions of what happens when a borrower fails to repay a loan can severely affect their credit rating and capacity to avail another credit in their future.