What If You Have Not Paid EMI Of Personal Loan?

You can use personal loan in times of higher education, small home renovation, daughter’s wedding, big purchase, vacation or medical emergency. But when you take a personal loan, you also have to pay the monthly instalment. For this you have to be disciplined.

But you know what will happen if you do not repay your personal loan? What action will the lender take on the payment of a personal loan? Will the defaulter have to go to jail?

Let us know what the defaulters are

Careless customer

If the careless customers are those people, then without analyzing the EMI / NMI ratio, they take more loans. These people do not have money when EMI date arrives and they become loan defaulters.

Wilful defaulter

Wilful defaulters are those who have the ability to repay, but those people do not repay. Wilful defaulters try to fool the lender by giving false reasons. According to the RBI regulation, wilful defaults occur due to several reasons such as non-payment of debt despite having money, giving money to the defaulting unit, misinformation of property and income and making fraudulent transactions. Wilful defaulters can be jailed under section 420 of the Indian Penal Code.

Real defaulter

There are many people who were paying EMI regularly for a long time but are unable to repay EMI due to some personal reasons like going to job, medical emergency, lack of money etc. The customers whose problems are real, they have some rights and no lender can torture them.

These can be the reasons for not repaying personal loan

1. Bad effect on credit score: Whenever a customer applies for a credit card or loan, his credit related information is sent to CIBIL and other credit bureaus. Therefore, if the customer has defaulted on a credit card or personal loan, then his credit score is negatively affected. As a result, in the future the customer has to face difficulties in getting a loan or credit card.

2. Follow-up from the lender: As soon as you miss a single EMI, the lender starts to follow up with you. The bank sends you the accounts and e-mails, in which the overdue amount and penalty charges are written along with the interest. If you do not repay the loan for more than 3 months, then the bank can take legal action.

3. Forfeiture of Guarantee: In case of secured loan, the bank can seize the property, which you have pledged against the loan. This is how the bank compensates its loss. If there is a co-applicant or guarantor under the guarantor agreement, the bank can also ask him to repay the loan.

4. Legal action: If you do not repay the loan even after reminding many times, the lender will be forced to take legal action against you. The bank can block your savings account or file a criminal case.

5. Use post dated checks: Banks often keep signature and non-dated loans while giving loans. When you do not pay the loan, the bank keeps these checks for clearance. If the check bounces, the bank can file a criminal case against you under Section 138 A of the Negotiable Instruments Act and get it arrested.

So if you are not able to pay the bank due to any financial problem, then the advice is to talk to the bank or lender directly on this issue.

How to negotiate an unpaid loan

If you are struggling with money, then the bank or NBFC, whichever loan you have taken, contact him. If your lender is accredited with RBI and you have already told about your problem, then the bank will do everything possible to help you and you will not get into trouble. The bank can help you in these ways.

1. Reducing EMI: If you are unable to repay the EMI, the bank reduces the EMI by extending the loan period. This is called loan rescheduling of restructuring. You can pay EMI due to the small amount. But the loan period cannot be extended beyond a fixed limit.

2. Change in secured loan to unsecured loan: The bank can convert any unsecured loan into safe to reduce EMI.

3. EMI free period: If you are unable to repay the loan due to cash strapped, then this kind of facility can help you. In case of loss of job, loss of business, medical emergency and necessary expenses, the bank gives an exemption to pay EMI at a fixed time like 2-8 months. As soon as you start getting money again, you can start the EMI payment again. But not paying EMI for a long time spoils the relationship between customer and lender.

4. Loan Settlement: Many times, the customer is unable to repay the loan now or in the near future. But he is willing to settle the loan by paying a part of the loan. The bank can accept this offer because the bank will get some part of its loan. But due to loan settlement, your credit score will be severely affected.

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