No matter how conscientious you are when it comes to matters of finance; there are times in life when unplanned financial emergencies can get the better of you. At such times, all you need is quick funds without any trappings. The easy solution to a situation like this is a personal loan. As a genuine borrower, you can take a personal loan to get over your immediate financial crisis at hand, with all good intentions to make timely repayments.
If your credit history is good, getting a personal loan is a breeze. You can get a personal loan approval in a matter of minutes and the funds are in your account in a maximum of 72 hours. However, to ensure that your loan is approved without any glitches, make sure that you take the advantage of a free CIBIL report check, before you make the personal loan application. Your CIBIL report and score is a barometer of your financial health. It is also mandatory for all lenders to access your CIBIL report as a part of their credit assessment process.
Stringent norms for default
Once, your personal loan is approved, you can continue to build your credit score by making timely repayments. However, due to some unforeseen circumstances, if you are not be able to make repayments on time, you may find yourself in a spot. Since, a personal loan is an "unsecured loan" (which means that there is no asset such as a house or a car backing it), lenders are more stringent when it comes to a personal loan default. If you have missed more than three repayments of a personal loan, you may find yourself in the loan defaulter list. What’s more, it is considered a criminal offence.
If you happen to miss one or two consecutive payments, you are sent a default notice from stating that the post-dated cheques (PDC) that you had presented at the time of taking a loan, will be submitted to the bank. This notice will be served if you do not respond to the reminder phone call/emails that the lender may make or send out at the first instance of a missed payment.
If you still do not respond to a notice, such as the one mentioned above, you are sent another notice stating that your PDC will be presented to the bank on a particular date. If the cheque bounces on this date, your case automatically passes on to the legal team of the lender. Dishonour of cheques is considered a criminal offence under Section 138 of the Negotiable Instrument Act of 1881.
Not to mention, that you will find yourself on the loan defaulter list. This in turn will make it difficult for you to get further access to credit at a future date, when the requirement for a line of credit may be even greater. However, if you still clear your outstanding even at this time you will be able to successfully evade the legal consequences of a loan default.
If you find yourself in a situation where you are unable to repay your personal loan, make sure you connect with your lender on a priority basis. If your reason is genuine, you may even be able to get a temporary halt on loan EMIs for a few months, albeit with a penalty. Alternatively, you can also request the lender to extend your loan repayment tenure to reduce the EMI burden.
Ideally however, you should avoid getting into a situation like this. While unforeseen circumstances are indeed unavoidable, it is prudent to build an emergency fund for situations like this. An emergency fund will help you tide over any financial crisis and keep you falling into a debt trap. Lastly, but not the least, it will help you keep your credit score intact for future possibilities of credit access.
However, to ensure that credit accessibility is not at stake, keep a vigil over your credit report at least twice annually. You can use the facility of checking one free CIBIL report in a year to keep a periodic watch over your credit health.