The ‘PNB Fraud’ exposed some of the worst flaws in India’s banking system. While the blame game continues between the Punjab National Bank and other lenders, more than Rs.11000 Crore have been lost to scam. The issue of interest lies in how the bank issued Letter of Understanding (LoU) for close to 7 years towards import receipts of Nirav Modi and the associated firms. While the Nirav Modi-PNB Fraud throws questions such as “Can we trust the bank’s fraud protection policies?”, “Is online banking and online lending the best option?” and “Which are the best online loan websites to trust?”
This is one way of looking at it – Borrower to Lender view. What about the lender or Loan Singh’s case, Lending Platform-Borrower view? What happens when a borrower defaults on his/her personal loan? What is the penalty on personal loan default? Are there any punishments on personal loan default?
There are no two ways about it. A personal loan default is a serious concern – To You – the borrower and to Loan Singh – the personal loan providing website/platform. It is a blemish on your credibility. There can be umpteen reasons for your personal loan defaults. You might have forgotten to pay the loan EMI due to being too lax or absent-minded or simply short on funds.
What is a Personal Loan Default?
Inability to repay even a single loan EMI can deteriorate your relationship with Loan Singh. We are a digital lending platform that provides personal loans to salaried individuals based on past repayment history and recent finances (last 6 months). From your credit history, we already know that you are good at handling credit; we do our best to remind and prospectively reprimand you in case of a default.
An emergency personal loan is helpful for a number of purposes of the loan, such as, buying a second-hand car, paying for medical expenses or for travel tickets to go abroad. Let’s learn more about personal loan default and what you can do to rectify your standing to a creditor.
A loan default or loan delinquency is your failure to make loan repayments when they are due. Extended delinquency can result in a personal loan default. It is your failure to repay the loan as per the terms agreed between you and credit institution (Loan Singh). 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 a credit institution. For an unsecured loan, i.e. a personal loan, your credit score is likely to get damaged and Loan Singh is liable to take legal action against you. Therefore, defaulting on a personal loan comes with heavy consequences. The specifics depend on your situation, as in why you defaulted. But, it will usually be preceded by damage to your credit score and an additional penalty.
At Loan Singh, your credit score will not only get affected, your chances of availing a second loan with Loan Singh will disappear in smoke. Missed payments will be reported to the credit bureau. This will hamper your credit score and impede any loan application attempts in the future, not just with Loan Singh, but any bank as well. Traditional lending solutions (such as banks) recruit collection agents to collect the default amount physically (as per cash agreement format) or debiting the amount from your account. Defaults also increase your late payment fees, penalties, and legal expenses.
What are the Consequences of Personal Loan Default?
The operations team at Loan Singh is a team of individuals that not only works miracles in getting your loan approved within minutes, but also follow-up on defaulting borrowers. Our team will send you reminders for making your loan EMI repayments before the due-date. In case if you default with the loan EMI repayment, you will then receive preliminary 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. Reasonable time is provided to the borrowers to repay along with the added charges.
How to Pay EMIs effectively?
To ensure you escape a personal loan default, we have some tips that can help you manage your finances better and stay prompt with your monthly payments.
Prioritize debt payments
Ensure that you are extremely prompt while clearing loan EMIs and other credit-related payments.
With all these payments getting registered with credit bureaus, it is important that you pay-off these debt payments to prevent a negative credit history and also to prevent a fall in your credit bureau score.
Keep reminders on your phone or log in to Loan Singh’s dashboard to keep track of the due-date and impending EMI payments.
Build a budget
A better way to control your finances is by creating a precise budget and sticking to it. A well-planned budget will help you prevent over-spending. Your budget should include all your expenses – big or small.
Tweak your budget according to the rise in your income. Revisit your budget every 6 months, at least. Although it can be difficult, especially if you have high spending habits ingrained, a budget should be your priority to make your personal financial management work. This includes loan EMI repayments.
Track your expenses
Expense tracking is a habit that will ensure you keep track of daily, weekly or monthly expenses. This is important because in case you overshoot your budget, you won’t have the funds needed to pay the loan EMIs on time.
Keep track of your bank account balance, store all your bills, ATM receipts, invoices, etc. so that you can match these values with your expense tracker. The tracker can be a spreadsheet or a diary. Categorize the expense by type, date, and purpose. You will get to know how much you spent last week in restaurants or how much fuel goes into your motorcycle each week, etc.
Rainy day funds
An emergency fund gives you breathing space during a financial calamity. It will prevent you from looking for other options to pay your loan EMI, as well.
Clearing a personal loan is a debt. It is best you clear only one instead of thinking of paying loan EMIs with your credit card limit.
What are the Benefits of Prompt EMI Repayments?
Making prompt EMI repayments is greatly beneficial towards your financial peace. Let’s look at 4 benefits of being prompt in your personal loan EMI repayments with Loan Singh.
Good Repayment History with Loan Singh to avail the second loan
Yes! That is true. The awesome thing about availing a personal loan from Loan Singh is the repayment history you build. We appreciate your efforts to pay the EMIs on time and ensure you can then avail another loan – faster than the first one. Please do not make it difficult for us, and for yourself, by defaulting on your EMI repayments.
More Savings by Avoiding Added Charges on Default
Nobody wants to pay more for anything. You look at the cashier with aghast when he/she tells you “Sir! Your bill is coming to Rs.4,999. Is it okay, if I redirect your balance of Re.1 to the children’s fund?” While this is a noble thought, people always expect us to feel no worry when giving a little from what we earn. You have so many other priorities to spend your money on, instead of paying extra for a loan default.
On Time EMI Repayments Prevent Late Penalty
With a late penalty you not only have to spend more, you still have to face the ignominy of being a defaulter. It is a worrying sign. Wouldn’t it be better if you set up reminders over your Gmail calendar, put up sticky notes on your fridge or simply provide Loan Singh with your details to auto-debit the EMI amount before the due date?
A Boost in Your CIBIL Score
We have been reiterating about building your credit score since Day-1. A good repayment history, with Loan Singh, will allow you to avail a second loan without a hick. But, this will also boost your credit score to help you get a credit on your credit cards, secured loans, etc.