Personal Loan Default – Loan Singh Discusses Its Consequences

personal-loan-default

Introduction

You need to 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 health, 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.

 

What is a Personal Loan Default?

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 loan as per the terms agreed between you and credit institution (lenders). 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 your credit score will get adversely affected, even your chances 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”

Now this was a more subtle reminder. The notice can get vociferous if you do not adhere to clear the overdue amount.

“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.”

 

How to pay EMIs effectively?

To ensure you never default on your EMI repayments, we have some tips that can help you manage your finances better and stay prompt with your 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 a fall in your credit bureau score. Keep reminders on your phone or login to the Loan Singh 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 & 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 later check these against your expense tracker. The tracker can be a spreadsheet or a diary. Categorize the expense with 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 in case a calamity strikes. It will prevent you from looking for other options to pay your loan EMI, as well. Not clearing a personal loan becomes a debt. It is best that you do not think of paying loan EMIs with your credit card limit. That is a big No!

 

4 Benefits to Making Prompt EMI Repayments

Making prompt EMI repayments is greatly beneficial towards your financial peace. Let’s look at 4 benefits of paying your personal loan EMI repayments with Loan Singh.

Good Repayment History

Yes! That is true. The awesome thing about availing a personal loan from Loan Singh is the prompt repayment history you build. We appreciate your efforts to pay the EMIs on time and we ensure that you can then avail another loan faster than the first one. Please do not make it difficult for us, and for yourself, by defaulting in your EMI repayments. It gives Loan Singh a sense of security that good borrowers are availing a personal loan.

Save More by Avoiding Charges

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.4999. 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 to impart a little from what we already earn. You have so many other priorities to spend your money on instead of paying extra over a loan default.

Pay EMIs on Time

With a late penalty, you not only have to spend more. Moreover, you still have to face the ignominy of being a defaulter. It is a worrying sign. The prospective EMI repayments will have sent reminders over SMS, Email and Call. Wouldn’t it be better if you set-up reminders by yourself 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?

Boost Your Credit Score

We have been reiterating about building your credit score since day one. A good repayment history with Loan Singh will allow you to avail a second loan without a hick. This will also boost your credit score to help you get a credit related to credit cards, secured loans, etc.

 

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