Availing any loan is a solemn obligation, one that requires your utmost discipline, irrespective of who the lender or institution is. Hence, you must be fluent with its terms and conditions, especially about those pertaining to not repaying healthily. In simpler terms, you must be thorough about what happens if you default on a personal loan.
When do you become a defaulter?
Being unable to repay one or two EMIs aren’t enough to mark you as a defaulter. However, if you fail to repay several instalments timely, that’s when a lender will report you as one.
However, some financial institutions and lenders do provide a peace offering. They may furnish you with a grace period post the repayment date, during which you can still complete the EMI payments. They will still incur late fees on you, but you’ll escape the dreaded title of being a loan defaulter.
What follows after defaulting on several personal finance EMIs?
If the nightmare does arrive and you default on several personal loan EMIs, here are the repercussions that you’ll have to endure: –
Credit scores take a potent hit
As per usual, NBFCs and financial institutions report missed repayments to credit bureaus such as the CIBIL. Hence, personal loan for CIBIL defaulters becomes a tumultuous storm to overcome, as their credit scores lower drastically. Ultimately, this will make it more challenging from them to avail any loan or credit in the future.
Action for unsecured loans
Since most personal financings are unsecured, the lender may take the matter into court and get repayment through wage garnishments or placing liens on your assets such as your house.
The financial strain grows continually
Since loan defaulting brings an array of penalties with it, including legal costs and late fees, all of these will ultimately add up to the outstanding balance. Hence, your financial worries will continue growing as your total will ceaselessly keep increasing.
Your guarantor or co-signer faces the brunt
If your loan entailed a co-signer or guarantor, they’d be the next-in-line to face the impact. Their CIBIL scores will dip too, while they’ll also receive constant calls from recovery agents and lenders to repay.
How to avoid all this?
The very first solution to steering clear of these troubles is maintaining your personal loan eligibility. Timely repayments and adhering to the lender’s rules and regulations will ensure that you never come across defaulting at all.
Next, you can avoid defaults by selecting the proper lender in the first place. Choose one who offers more straightforward repayment terms, such as nominal interest rates, flexible tenures that align with your repayment capacity, etc. In doing so, you’ll have lower EMIs and hence, repay comfortably even in times of fiscal distress.
Lastly, planning ahead is the most significant step. With numerous online lenders now providing personal loan EMI calculators, you can quickly check the instalment amount by filling in details such as the loan tenure, amount, interest rate, etc. Thus, you can strategize, select the financing option that suits you best, and avoid getting in the ring with loan defaults. Sounds good, doesn’t it?