When thinking about a credit to be taken, the flip side is repayment. And not to think negative but, what if one won’t be able to repay the debt? It is said, get into something when you know all: good and bad about it. So, just in case if you have to go through bad, you are well prepared. Usually, the banks or the NBFCs (Non-Banking Financial Institutions) will approve only those applications where the risk factors are less.
Credit score, Earnings, DBR (Debt to Burden Ratio), liabilities etc all is checked right before approving a credit line. But, one can never know the actual intentions and emergencies they may come across. So of course when it comes to unsecured loans, the risk factor is more as nothing is kept against the amount borrowed compared to those of secured loans. And hence, a risk is little more compared to secured loan in an unsecured loan.
Let’s look at the major consequences if one fails to repay the debts:
When for a few months there are series of late payments and then missed payments, which obviously gets the borrower to pay more interest than actually fixed. Also on the current amount that is to be paid along with the upcoming EMIs.
One of the major setbacks that come through failing to repay the debts is it’s an effect on credit score also know as cibil score.there are major drops in the score and a good score which is 750 or plus may get one in a bad score which is 600 or less. And a bad or a low cibil score has a series of mishaps that straightly lay ahead.
The major effect that happens after the score drops and one fails to repay the debt is getting the new credit or loan applications rejected. Since the borrower has already missed on payments, the score has gone down, the lender understands the financial crunch the borrower may have and it makes a riskier profile if the credit application is approved and no financial institutes would appreciate. One option that people may think is taking a personal loan and paying off all the previous debts. But somehow even that becomes difficult.
Strange and hard to believe but if an individual is on a good post in the organization where they have take care of very fragile and private information of the firm, which is a very sensitive task, and if the lenders or debt collectors contact the organization, it gives the impression that the employee is no financially responsible, and if he/she is not financially responsible how will they take care of the organization’s sensitive information? This may take a troll and one may lose the job. And if they are planning to apply for a new job, it can also cause the effect or rejection in the new job too!
With all that which is happening, rejection in loans, low cibil score, losing a job or more, plus the constant calls of debt collectors, will cause nothing but the mental stress. Till will also impact eventually in personal space and health.
What to do in such case then? Go ahead and talk to a banker. Tell them the actual reason for you to failing in repaying the deb. Be genuine and if they may feel it is true, they will consider. They may wave off some interest, or do a settlement or increase the tenure. They may approve a new secured loan, of which you can repay the old debts and hence this can slowly help in rebuilding the credit report. But yes, one has to be calm and patient!