What Happens When You Fail to Repay a Loan?
When a financial institution lends you money, it puts a lot of trust on the fact that you would repay the amount. And, if you fail to repay the loan, there are many ways in which the bank can get it back. If you are planning to take a loan, Bajaj Finserv is a reliable lender that offers various benefits such as low interest rates, zero prepayment penalty, and nil foreclosure charges. Read on to find out what happens when a borrower fails to repay the loan.
Your Credit Score Crashes
Suppose, you take a loan from a bank, and fail to pay it back. Subsequently your credit score crashes immediately. A dip in the credit score can negatively affect your credibility as a borrower, especially when you want to borrow a loan in future. This is because banks and lenders rely hugely on a good credit score, while examining your eligibility to take a loan. Most banks are unwilling to provide loans and other financial services to a person with bad credit score.
Bank Sends Notices and Reminders
Most banks allow one or two payments to slip by. But, in case you do not pay the loan amount in three months, banks send a notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), demanding you to pay your EMI soon. By taking a loan from Bajaj Finserv, you can also go for the refinancing feature if you are having trouble coming up with money for the EMIs.
You Face Legal Consequences
If you do not respond to the mails sent by banks, a legal notice is sent to you. In case, the loan amount exceeds INR 10 lakhs, you also receive a legal notice from the Debt Recovery Tribunal. This is the last stage before the bank begins the process of foreclosing the property you have given as collateral. The banks can also consider your collateral as a non-performing asset if you fail to repay home loan.
Your Collateral will be Attached
As far as banks and lenders are concerned, repossession of collateral is the last thing they would resort to. In case of failure to repay the home loan, the banks have the right to claim ownership of the collateral, and auction it. This usually happens when a borrower does not respond to the legal notices, and neglects payment cycles.
In case, you have fallen into a financial crisis, and are unable to repay your personal loan or home loan, there are some easy ways by which you could avoid a penalty. Refinancing your loan, paying off high-interest loans fast, and reducing your cost-of-living until your loan is fully repaid are some useful tips to repay your loan on time. You can even consolidate your loans by applying for a personal loan. Applying for a Home Loan through Bajaj Finserv also reduces a lot of financial burden on your part, as it offers Home Loans with smart options that save you money, stress and time, at low interest rates.