Quite a few people are not aware of the significance of repaying debts borrowed from banks, and non-banking financial institutions. A loan defaulter is born when a borrower fails to pay EMI’s as per the loan agreement. Therefore, it is the responsibility of a borrower to carry out payments within a stipulated period failing which an individual is barred from applying for a loan in the future.
On the other hand, some willful defaulters turn a blind eye to repaying debts purposefully. It is a fact that a single default will be registered in your credit report and this would pose a negative impact on the credit score. Therefore, do you intend to know the legal actions taken against a loan defaulter? Some of them are as follows:–
Notifications:—Non-banking financing institutions (NBFCs), banks, and financial institutions like Money View provide ample time to repay dues before seizing properties and recovering the pending amount. As per the Securitization and Reconstruction of financial assets and enforcement of security interests Act, banks have the right to execute the proceedings as mentioned below —
If in case the loan is categorized as a non-performing asset (NPA) and outstanding dues for three months, the concerned bank or a lending institution proclaims a notice of sixty days to repay the dues.
If you are unable to repay the pending amount within a stipulated period, the banks have the right to attach properties or assets.
Banks or financial institutions like Money View provide thirty-days grace period describing the sale of assets before the sale of a property.
- Access to fair value:—
If an individual fails to repay the dues within a certain period, the bank attaches the assets, but they do not have the right to fix a selling price on their own. Apart from issuing a one-month repossession notice regarding the auction, banks share a fair value notice to you specifying the actual sale price estimated by concerned bank officials. If in case you feel that the sale price is underpriced, he/she does have the right to oppose and quote a fair price value. The concerned bank would reconsider your objection and evaluate the property.
- Subject to hearing:—
An individual does have the right to oppose the repossession notice shared by the bank amidst the notice period. However, an authorized officer is supposed to respond to the objection raised by the customer within seven days as to whether they have accepted or rejected specifying valid reasons.
- Right to claim outstanding amount:—
The chances of fetching a higher sale price for the property had been repossessed by the bank. If in case the concerned bank has a balanced amount in their account after recovering the outstanding balance, you have the right to claim the balance amount.
- Treating customers in a fair manner:–
Under no circumstances, banks have the right to humiliate or mistreat an individual for a default payment. Instead, they should request you in a polite way to fix the place and date for carrying out further proceedings. The timings for communication between agents and host must be between 7 AM and 7 PM and concerned agents are not supposed to treat the host with the utmost respect.
Ensure a proper means of communication with the concerned bank or financial institution
Borrowers should make sure that they repay the outstanding amount within a stipulated period. Today, the majority of the people are encountering unanticipated situations soon after procuring a loan. This proves to be a challenging one for them. In such cases, it is always better to approach the concerned bank and try to convince them of the crisis you are facing now. If they are convinced, they might assist you in dealing with further financial dealings in a hassle-free manner. A borrower does have the option to request the bank for the following:—
- Maximize the loan tenure to ensure a smooth EMI’s
- Relaxation in the terms and conditions
- A complete overhauling of loan
- Offer a temporary relief if in case he/she is facing a serious issue. But, they might levy additional fees or charge a penalty.
- If possible lower the rate of interest by converting an unsecured loan into a secured one
- Some banks provide you with an option to clear the loan via a one-time settlement payment. However, you should be aware of the fact that it might affect your credit score.
What would happen if a borrower fails to repay the loan amount?
A single default in loan repayment forces the banks or lenders to follow up with a borrower via mail or letters. Therefore as a borrower, you may approach the bank and explain in detail the current financial crisis. If possible, request them to restructure the loan and set relaxation in the terms and conditions.
- Failure to repay the loan amount within three months might force the lender to take further actions against the borrower. Even overdue would entice default interest and would emerge as a financial burden in the future.
- Default payments would have a great impact on the credit score of an individual and barring them from availing loans in the long run.
- Failure to repay a home loan would lead to attaching a property by the lender soon after executing the legal proceedings.
- Any failure in paying the auto loan would lead to the seizure of a vehicle.
- The gold loan repayment tenure is about twelve months and failure to repay it within a stipulated period would force the lender to auction the gold.
- Personal loans are unsecured loans and the concerned bank will file either a civil or criminal lawsuit against the borrower for check bounce.
Conclusion
A personal loan is granted in the absence of security or a guarantor based on an individual’s repayment capacity. Therefore, it is the duty and moral responsibility of each borrower to clear the loan amount within a stipulated period and avoid default payments failing which would affect the credit score.