Keeping up with the repayment of loan and the timely clearance of the EMI can be a daunting task, especially when one is undergoing a financial stress. It is natural for an individual to pay for the survival expenses first from the limited finances. Such duress situations may lead to non payment of the obligations towards the lender. While this may lead to one getting tagged as a defaulter, but there is no need to panic.
If at all one finds himself in a situation where default is imminent and credit score takes a nose dive, one must connect with the bank and appraise of the situation. There may be a chance to receive some breather from the bank. Following can be the options.
Depending upon the vintage of relationship and repayment history, the bank may accept the request to reschedule the debt. This means that the loan can be restructured with a revised term. This will help in bringing down the monthly obligation. The bank may even look at reducing the rate of interest if persisted by the borrower in some exceptional cases. This will help both the borrower and the lender. A reduced EMI will help in timely payment of the installments and the lender will be able to secure repayments without having the loan to get tagged as a bad debt.
In some cases, a EMI holiday, also known as moratorium, can also be requested. If such request goes through, the borrower will get a few months’ time to restart the payment of loan. However the bank may levy a higher rate of interest on such arrangements. But none the less a marginal increase in cost is better than getting to get termed as a defaulter.
If the above options to not work out, the calls from collection department are bound to happen. The intensity of such calls is bound to increase with the increase in default period. One word of caution. Do not avoid collection calls. Avoiding these will only lead to further push from the collectors. Your availability and acceptance of the default would lead to reasonable collection efforts. You must have a frank discussion with collectors rather than avoiding them.
You can look out for a one time settlement of the outstanding if the availability of funds permit so. This will help in you gaining peace and complete discontinuation of the collection efforts. This will lead to you starting to focus on rebuilding the lost financial strength rather than having high emotional and stressful discussion with the collectors. Settlement is a way to buy peace and then channelize all energies in constructive efforts.
But settlement does not mean that you have come clean. The bank while will not follow up, you must plan to repay the unpaid amount and charges if any to the bank once you bounce back. If not do so you may have to look at options of personal loan for CIBIL defaulters and there may be a situation that even such loans might be inaccessible.
Means that you must take one time settlement as a time gap arrangement and must plan repayment as and when the resources permit.
In case of a collateral backed loan, like an auto loan, gold loan or a housing loan, the bank may initiate recovery of the unpaid amount through the sale proceeds of the collateral. You can decide to just go with it and the bank will transfer the balance funds back to you after recovering its dues. In case you do not wish to do so and if the condition permits, please continue to pay small amounts or atleast the due interest to avoid selling of the collateral.