A loan delinquency is your failure to make loan EMI repayments. Extended delinquency can result in a loan default. It is the failure to repay the availed loan, as per the terms agreed between you and credit institution. Depending upon the type of loan, different things can happen. In case of a secured loan, a home or a car can be absorbed and sold by the credit institution.
For an unsecured loan, i.e. a personal loan, your credit score is likely to get damaged and the lender is liable to take legal action against you. Therefore, defaulting on a personal loan comes with grave consequences. The specifics depend on your situation – as and why you defaulted. But, it will usually be preceded with damage to your credit score and additional expenses.
At Loan Singh, not only will your credit score get adversely affected, but also your chance of availing a second loan with Loan Singh will be hampered. Missed payments will be reported to the credit bureau. This will hamper your credit score and impede any loan application attempts in the future. Traditional lending solutions like banks recruit collection agents to collect the default amount physically or debiting the amount from your account. Defaults also increase your late payment fees, penalties and legal expenses.
Consequences of Personal Loan Default
The operations team at Loan Singh not only works to get your loan approved in a jiffy but follows-up on defaulting borrowers, as well. Our team will send you reminders for making your loan EMI repayments before the due-date. In case you default on the loan EMI repayment, you will receive reminders to pay the EMI along with late fees. The penal interest is not charged out of thin air. It is an amount you agree to pay in your loan agreement. Further proceedings depend upon your approach to the issue. A reasonable time is provided to the borrowers to pay the EMI along with the added charges. A default notice looks something like the one below
”Dear Customer, this is to bring to your notice that your personal loan with number 1234XYZM is overdue for X number of EMIs. Despite repeated reminders, telephonically and via Email, you have not adhered to it. If we do not receive your overdue amount before the end of this calendar month, we will be forced to present your PDC (Post Dated Cheque) to the bank”
The above is just a subtle reminder. The notice can get vociferous if you do not adhere to clear the overdue amount. An example of a sterner response would be
“Dear Customer, as you have not cleared your overdue amount, we will be presenting your PDC by today afternoon, i.e. on 8th August 2017. If the cheque bounces or is not honored, your case will be handed over to our legal team which will lead to serious legal consequences. Kindly remember that this is a criminal offence related to the Dishonor of Cheques under Section 138 of the Negotiable Instrument Act of 1881. Avoid this by paying your dues before the end of the day.”
Not only will your relation with Loan Singh get affected but your credit score will also take a hit. Remember that all credit related information of loan applicants and credit card users are sent to CIBIL. Every loan application requires a credit bureau score check and a look at your credit report. Only if your credit score is healthy will your loan application be approved. Defaulting on your loan can get your credit rating to come down, and subsequently make getting a loan approval difficult.
At banks, a preliminary notice is first sent to the borrower where the amount overdue is mentioned with the interest rate. Also mentioned is the penal interest. If the bank believes that you as a customer is delaying the repayment purposely, then the bank opts for legal proceedings. If the loan is supported by a guarantor, then the bank might approach him/her, as the guarantor agreement states that the guarantor will pay for the loan in case the primary applicant defaults.
Legal proceedings are the final step taken by the bank. In case of ill health or sudden emergencies, the bank will provide adequate time to the borrower to repay the EMIs. The Reserve Bank of India’s guidelines forbids banks to use muscle power when recovering loans. There is a code of conduct for the banks to adhere. Reasonable time is provided, after which the legal proceedings are initiated.
Personal Loan Default Prevention
There surely must be a reason as to why you couldn’t pay your EMIs for a single month or many in a row. You could have gone through a tough time in your personal life, lost a job perhaps. Medical emergencies can cripple our everyday life as well. The amount designated for the EMI must have gotten spent elsewhere. The reasons are numerous.
You should inform the credit provider or loan company about your inability to repay the EMI temporarily. Also inform them that you are okay for being levied the penal interest and will try to clear the impending dues as fast as possible. A situation like this can occur to anyone, all you need to do first is to be honest and open about it.
You could be struggling with the loan EMI amount, and find it hard to repay. You could ask for the monthly outgo to be reduced for you. You can try asking of course. If successful, your loan tenure will be increased and you can then be capable to repay the EMI easily. Once you find it easier to pay the EMIs due to a Diwali bonus or a salary hike, then you can go back to the initial EMI amount.
Another task that you can employ is seeking the terms and conditions of the approved loan to be adjusted. For example, the interest rates could be lowered or the tenure, as mentioned above be increased.
If a borrower is unable to maintain the terms and conditions of his loan, he can request the lender to relax the same. This may lead to a reduction of charges, lowering of interest rate, lengthening of the loan tenure, a moratorium on interest, etc. A one-time settlement of the loan is another outcome. This option is implemented when a borrower is really struggling to repay the loan to level where his interest accumulated is larger than the principal loan amount.
If a settlement is reached with your loan provider, then it’s time to get your financial health back on track. Sit and analyze your current situation. Do not avoid calls or messages from the funding provider. This could escalate the issue further. Instead work out a time frame for the repayment to commence.
Always be wary of personal loan default and its consequences. Agreed that a personal loan is availed in times of emergency (borrowers can apply for a personal loan towards a number of purposes such as medical expenses, second hand car, festival spending, travel, marriage, home improvement, etc.), but that does not mean you take the repayment process lightly. A personal loan default is a serious concern. It will affect your credit score and make it difficult for you to get any form of credit in the future.
If you have availed an online personal loan from Loan Singh, then make sure you are prompt with your EMI repayments. Sometimes you might forget to pay the EMI either due to being lax or absent minded. Such situations are taken care of by the NACH mandate which allows Loan Singh to auto-debit the EMIs from your account. This prevents you from missing any EMI repayment due-date. Loan Singh is a digital lending platform that provides personal loans to salaried individuals – based on their past repayment history and income. From your credit history, Loan Singh already knows that you are good at handling credit. Loan Singh does its best to remind, and prospectively reprimand, you in case of an EMI default. Let’s look at what is a personal loan default, its consequences, and how to make prompt EMI repayments.
About Loan Singh
Loan Singh is a digital lending platform that prides in providing online personal finance loan or unsecured personal loan to salaried individuals. You can apply for quick funds as an easy emergency loan which is not a bank loan. We provide a loan with the best personal loan interest rates. The instant funds, or instant loans, are loans between Rs. 50,000 and Rs.10,00,000 taken for purposes such as:
- Home improvement loan/Home renovation loan
- Marriage loan/ Wedding loan
- Medical loan
- Used vehicle loan
- Consumer durable loan
- Vacation loan
- Debt consolidation loan
- Credit card refinancing loan
- Job relocation loan
- Smartphone loan
- Travel loan
- Festival loans
- Gold jewelry loan
- Shopping loan
- Lifestyle loan
- Short term loans
You can calculate your easy EMIs using our personal loan EMI calculator. We accept bank statement and PAN, for quick loan approval. A bad credit score or credit report errors can lead to personal loan rejection. The ‘Loan Singh Finance Blog’ is one of the best finance blogs in India. Loan Singh is a product of Seynse Technologies Pvt Ltd and is a partner to the Airtel Online Store.
Loan Singh’s Online Presence
Loan Singh is not an anonymous digital platform. We are present on almost all leading social media platforms. All you need to do is look for us. You can find us on Loan Singh Facebook, Loan Singh Twitter, Loan Singh Google+, Loan Singh YouTube, Loan Singh Pinterest, Loan Singh Instagram, Loan Singh LinkedIn, Loan Singh Blogarama, Loan Singh Google Business, Loan Singh Medium, Loan Singh Reddit, Loan Singh Tumblr, Loan Singh Scoop It, Loan Singh Storify, Loan Singh Digg and Loan Singh Blogger.