Mired in Neck Deep Loans – Then this is for you!

Wish to own a home … a branded car … go on foreign pleasure trips … now they are not that difficult. Bank loans are making a reality of our dreams. So long everything goes on well, no problem, but when once, for peculiar reasons, if the repayment of loan installment is delayed or stopped, then the real problem arises. Banks are ready to sanction loans to meet each and every of our needs; they do not even mind about the purpose for which the loan is taken.

Because loans are freely available for just for an asking, repayment of huge amounts of monthly installments puts a predominant stress and causes strain on our earnings. Think about how to make the Loan Equated Monthly Installment (EMI) repayment when an unfortunate situation arises, where the job is lost or suddenly hospitalized. These are the situations, when many people get stuck in the quagmire of loans. They will be left with no alternative except to avoid facing the Banks, forgetting that such avoidance create some more severe problems for them. 

Banks generally condone delay in payment of EMI for one or two months in case of an honest customer, but suspicion arises in case of intermittent and irregular payments. Persons, who are so far regular in EMI payments, when faced with an unforeseen contingency, it is advisable to inform the Bank about it. If satisfied with the reasons, banks positively respond and suggest and allow some more alternatives, because, if a loan remains unpaid for a longer period, it has to be declared as non-performing asset (NPA). So, they suggest an alternative beneficial to both the parties.

Rescheduling the Loan EMI

In case you feel that the EMI is heavy, inform the bank convincingly. Banks will agree to reschedule the loan. EMI can be reduced by stretching the repayment period. This facility is also having its own disadvantage to the customer, since the period of repayment is extended, the gross amount of interest payable also increases. It is a temporary reprieve to get out of the problem. Once the problem is overcome, you can try to repay it as fast as you can or pay the entire outstanding loan in a lump sum.

* In some circumstances, where the income has completely stopped or left the present job to join a better one, plainly tell the bank about it. They may exempt you from payment of installments for some time, for which, of course, you will have pay a fee.

Increasing Repayment Period for a Loan

Compared to the loans, insisting no security with personal credit card, a number of facilities are available in secured housing loans. The reason is that the possibility of the value of the pledged asset will go on increasing more than the loan amount and therefore, banks will not be in a hurry to take immediate action; they even are prepared to review and extend the repayment period. However, for such action, there should be a strong and convincing case for non-repayment of the installments. Reserve Bank instructions restrict the extension of the repayment period only to one year.

Close Down the Loan

Banks build pressure for repayment of loan in one lump sum in case of chronic defaulters. In such circumstances, you can start negotiations with the bank. Depending on the developments, the bank may waive all the penal fees and in some circumstances, may also reduce the amount of outstanding loan. Under inevitable financial circumstances, Insolvency Petition (IP) can be submitted in a Court and orders obtained.

* Banks act harshly in case of loans granted without any security, but on a personal credit card. In such a case, try to covert the same into a loan on some security, which not only reduces the rate of interest, but also reduced the strain of EMI.

* Avoiding a problem is not a solution for it; face it with determination. Otherwise, it grinds down your psychological stamina and you may have to lose your hard earned properties. Try to convince the bank to show that you are putting sincere efforts for repayment of the loan. It helps to avoid further problems and felicitates to get rid of the loan.

Under inevitable circumstances …

If no solution could be found and all doors are closed, banks prepare themselves with the next chain of actions. Conditions vary with the amount of the loan.

In case of Vehicle Loan

In case of vehicle loans, if the repayment of installments is not made for three months, banks will issue notices to the defaulters allowing them 7 to 15 days for payment, stating therein that in case of non-payment, the pledged vehicles will be seized.

* Even after seizing the vehicle, the defaulter will be given one more opportunity to cleat the vehicle loan. The banks will specify the amount to be repaid for release of the vehicle and also inform that if still there is no response, the vehicle will be auctioned.

* Vehicle will be handed over within 7 days if the total loan amount is repaid.

* In the event of non-repayment, then Bank will auction it within 90 days from the date of taking possession of the vehicle and adjust the amount to the loan account.

* In terms of RBI instructions, notice will has to be served on the defaulter, after it is identified as Non-Performing Asset (NPA).

* Customer will be allowed 60 days for repayment of the loan, after which another notice will be served.

* In case the customer refuses to repay the loan amount, Authorized Officer of the Bank will serve a suitable notice on such customer.

* After taking possession of the property, it will be auctioned after 30 days. Still the defaulter has the opportunity to repay the loan before that date. If still there is no response, the date, time and place of the auction will be intimated to the customer. Loan amount will be adjusted from the auctioned amount and the balance, if any, will be handed over to the customer.

Properties will be attached for non-payment of loan. Along with it, credit score goes down. He will be black listed by the banks and no loans will be granted to him in future. Even when loans are granted, the rate of interest charged will be heavy. Therefore, it is advisable to repay the loans taken from banks promptly.