Let’s face it! There are no two ways about it. A personal loan default is a serious concern – To You, the borrower and to Loan Singh – the loan provider. 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 either due to being too lax or absent minded. You could be short of funds. An unavoidable circumstance beyond your control can be the reason. Inability to repay even a single loan EMI can deteriorate your relationship with Loan Singh. We are a digital lending platform that provides loans to salaried individuals based on your past repayment history and income. From your credit history, we already know that you are good at handling credit; so we do our best to remind and prospectively reprimand you in case of a default.
A personal loan is very helpful for times of emergency such as to purchase a second hand car, pay for medical expenses or pay for travel tickets to go abroad. Let’s learn more about personal loan default and what you can do to rectify your standing as a creditor.
What is a Personal Loan Default?
A loan default or loan delinquency is your failure to make loan repayments when they are due. 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 (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 consequences. The specifics depend on your situation, as in why you defaulted. But, it will usually be preceded with damage to your credit score and additional expenses.
At Loan Singh your credit score will not only get affected, your chances of availing a second loan with Loan Singh will also be gone 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. 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 is a competent team of individuals that not only work miracles in getting your loan approved in a jiffy but follow-up on defaulting borrowers. Our team will send you reminders for making your loan EMI repayments before the due-date. In case 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. A default notice looks something like the one below
Example for a Default Notice
”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.
“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 with your EMI repayments, 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 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 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 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. 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. That is a big No!
5 Benefits to Making Prompt EMI Repayments
Making prompt EMI repayments is greatly beneficial towards your financial peace. Let’s look at 5 benefits of paying your personal loan EMI repayments with Loan Singh.
Build a Good Repayment History with Loan Singh to avail a second loan
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 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 in your EMI repayments.
Save More 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.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 to Prevent a Late Penalty
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 added 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 CIBIL Score by Indicating Prompt EMI Repayments
We have been reiterating about building your CIBIL score since day one. A good repayment history with Loan Singh will allow you to avail a second loan without a hick, but this will also boost your CIBIL score to help you get a credit related to credit cards, secured loans, etc.
Trust Built Among Lenders Thereby Improving Your Credibility
Loan Singh’s digital lending platform allows lenders to invest their money to receive high returns. Now, if you pay your EMIs on time, it gives the lenders a sense of security that good borrowers are availing a personal loan. This not only convinces the lenders to continue investing their cash to serve your emergency requirements, but you can always remain assured of receiving emergency cash from Loan Singh’s platform.