Once you get that loan approval and calculate the EMI for it, comes the next step in the process—the payments. If for some reason you miss out on a payment or find yourself unable to keep up with the monthly instalments, then that is when the term “loan default” comes into play. The article speaks about the loan default consequences you can face in the event of not repaying the loan and the different kinds of defaults possible.
When Do You Default?
There are two reasons that usually lead to loan defaults, which are:
- Inability to pay the EMI and the interest on the loan
- Lack of willingness to pay the debt
Usually, banks consider even the non-payment of a single rupee as a default. Customer centric financial institutions like Bajaj Finserv are flexible with their policies, so it would be ideal to approach them about your options.
What are the Kinds of Default?
In almost every loan you can apply for, there are chances you can default on them. If we had to mention the various types, then student loan defaults, home loan defaults, and personal loan defaults would top the list.
Student and Education Loan Default
With the number of student loans that are sanctioned every year, quite a few end up with defaults. If after a specified number of days you fail to make the payment, then a red flag will be raised. Further non-payment could lead to consequences which would eventually affect your credibility as a borrower.
Home Loan Defaults
If you default on home loan payments, then the contract that you signed at the start of the borrowing process will give the financier legal rights to possessthe property. As the property or house is categorised as an immovable asset, the institution would first send a notice to the borrower. If you settle the amount in the specified timeframe that is mentioned, then the claim to the property would be forfeited by the company.
Personal and Auto Loan Defaults
If you default on your personal loan payments, then you can talk it over with your financier. If you explain the reason behind the inability to repay, you can devise another plan to help pay it back. In the case of automobile defaults, the institution would have the right to procure and sell the vehicle or asset. If the item is put up for resale, then you would get a notice of the same so that you have a chance to refute it.
Remedying the Default
Instead of wondering what happens when you default on a loan, you can use this article to bring yourself up to speed about what you ought to do if you do default.
- Don’t Run AwayYou owe the bank money, which means you are a debtor to the agency. Don’t try to hide from your problem. If you are unable to make the payments, then put that forward to the bank.
- Try NegotiationYou can renegotiate your next step together with the NBFC, which ideally benefits both you and the lender. Look into whether a lower interest rate or EMI could put you back on track with the payments. NBFCs like Bajaj Finserv offer good policies and services, which could come in help when negotiating for a change in your current scheme.
- Cut Back on Other ExpensesYou could try cutting back on other expenses for a few months while you concentrate on clearing the loan. This would help put you back on the repayment wheel, without having to rethink the EMI or rates.If you think you might be unable to repay your loan and could default on it, then do the needed research about loan default consequences before you decide on your next plan of action. Bajaj Finserv is a people-oriented lender, and could help you in re-adjusting plans if the need arises.