Loans, a convenient financial resource, aid in the immediate economic crisis for many. It’s monetary help that can be availed of from various banking bodies, which can be either banks or private lenders.
One should note that, as urgent and immediate is the need to get a loan, so does the necessity of a lender to pay the EMI on time.
Loan defaults, is a financial situation, many borrowers often find themselves in. And because of this many end up struggling to find a balance between stability and chaos. All of it, in the majority of cases, is a result of life’s unpredictability’s—be it a sudden loss of income or an unexpected illness—these situations have the potential to make one debt-ridden.
And with all of this, it’s for sure that the argument for skipping a loan payment is undeniable. However, there’s no lying; unknown and unexpected financial situations beyond our control tend to hinder the process at times.
On the other hand, there’s no denying that these circumstances do not arise on a daily basis. But, in order to ensure the state does not slip out of control or interest rate for missing EMI is added, it is best advised to take precautionary steps in advance.
Talking in terms of home loans, banks often exercise a degree of restraint, which includes immediate action after the initial lapse of 1-2 EMIs. However, the scenario takes a more pressing turn if this lapse extends to more than 4–5 EMIs. And in this case, financial institutions are forced to take a more serious step and initiate their pursuit.
When it comes to car loans and personal loans, a missed a loan EMI is marked by a heightened sensitivity, wherein some banks act upon even the first missed EMI. There are banks falling into this category that waste no time, making contact after just one month of default.
Examining the Roots of Default
The scenarios causing EMI setbacks are many, and most of all, it’s a temporary affair. However, some of those situations can include job loss, an unforeseen surge in expenses leaving insufficient resources for EMI payments, or an extended illness playing havoc with both finances and health. The triggers are diverse.
In a few rare cases, defaults may result from a permanent setback or the sudden demise of an individual without adequate financial safeguards for their family. These scenarios, though less common, warrant acknowledgment.
Addressing Transient Defaults
In the face of temporary defaults, adopting a proactive and transparent approach is paramount. Initiating a candid conversation with the creditor or bank to talk through the temporary setback of loan EMI payments is the first order of business.
One should note that ignoring the issue or dodging communication only serves to exaggerate the problem. In a conversation with the lender, you can explore various options to ease the situation, like EMI reductions and tenure extensions.
For those grappling with high interest rates, possibilities like loan refinancing, negotiating for lower interest rates, or seeking support from friends and relatives are essential strategies to try out. Simultaneously, a sufficient trimming of expenses is also advised, as it’ll help to encounter the immediate challenge but also fortify financial resilience for the road ahead.
Navigating the stress of EMI Collection
Facing loan collection agents is challenging. Our response either over call or in person should be courteous and with patience.
The Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA) have laid down explicit guidelines and a model code of conduct for debt collection practices, offering a shield against undue harassment. However, these rights should not be misconstrued as a reason for willful default.
Conclusion
As responsible borrowers, we must acknowledge our duty to repay loans, inclusive of accrued interest. While the occasional default may be attributed to unforeseen circumstances, it is imperative to recognize the absence of a justifiable excuse for failing to communicate with banks and collaboratively seek solutions. Waiting until the account is entrusted to a recovery agency is a risky gambit. Effective communication remains the linchpin, as any misinformation or evasion can needlessly complicate matters. The reality is stark: banks wield the right to pursue repayment, and borrowers must confront this reality with a heightened sense of accountability.
Mintra Finserv, a private funding body, also provides free loan consultation services to everyone in need. If you are going through loan defaults, get in touch with us, and our team will help you ease the process and guide you through it properly.
