What is a Default Payment?

A default payment occurs when a borrower fails to make an installment payment on their loan or credit account as per the agreed-upon terms and schedule. Whether it’s a personal loan, credit card, or any other type of loan, missing a payment deadline triggers the default status.

Consequences of Missing a Payment

Late Payment Fees: The immediate consequence of missing a payment is often the imposition of late payment fees by the lender. These fees can add to the financial burden of the borrower, making it more challenging to catch up with payments.

Negative Impact on Credit Score: A missed payment, especially if it escalates to a loan default, can significantly impact the borrower’s credit score. Being labeled as a personal loan CIBIL defaulter or having a default status on a credit card settlement can adversely affect one’s creditworthiness and ability to secure future credit.

Accumulation of Interest and Penalties: Apart from late fees, defaulting on a payment can lead to the accumulation of interest and penalties, increasing the overall amount owed. This can exacerbate the financial strain on the borrower and make it harder to resolve the default.

Legal Action and Debt Collection: In severe cases of loan default, lenders may resort to legal action to recover the outstanding amount. This can involve debt collection agencies, court proceedings, and even asset seizure in extreme situations.

Also Read Rebuilding Your Credit with a Low CIBIL Score Credit Card: Tips and Tricks

How to Avoid Default Payments

Set Up Reminders: Ensure you never miss a payment deadline by setting up reminders or automatic payments. This helps you stay on top of your financial obligations and avoid default status.

Budgeting and Financial Planning: Create a budget that accounts for loan repayments and prioritize timely payments. Effective financial planning can help you allocate resources efficiently and avoid default situations.

Communicate with Lenders: If you anticipate difficulty in making a payment, communicate with your lender proactively. Many lenders offer assistance programs or options for loan settlement that can help you navigate temporary financial hardships.

Seek Professional Advice: In case of financial distress or difficulty managing debts, consider seeking advice from financial advisors or credit counseling services. They can provide guidance on debt management strategies and help you avoid default payments.

Register with us today at https://loansettlement.com/ to learn more about our services and how we can help you!

Conclusion

Understanding the concept of default payments and their consequences is essential for borrowers to maintain financial health and creditworthiness. By staying vigilant, communicating with lenders, and seeking assistance when needed, borrowers can mitigate the risk of default and navigate their financial obligations responsibly. Remember, prevention is always better than cure when it comes to default payments.

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Don’t panic – there are options available to you.

The first and most important thing to remember when you’ve lost your job and are unable to pay your personal loan is that there are options available. Opening up a conversation with your lender can help you determine the best course of action. Depending on your lender and the situation, they may be willing to work with you to adjust your loan terms or  give you some extra time to pay.

Negotiate a payment plan with your lender

Lost your job and finding it hard to handle your personal loan payments. This challenging situation offers options, such as negotiating with your lender. You can discuss reducing or suspending payments, extending the loan term, or arranging a grace period. Always get agreements in writing, ensuring a clear understanding before signing any documents.

Consider refinancing your loan

Are you facing challenges in managing your personal loan payments? Refinancing can help you save money by lowering the interest rate or extending the loan term. If your credit score has improved since you took out the loan, you may be able to qualify for a better rate and save money over time.

Talk to your lender as soon as possible to explain the situation and ask for options

Your lender may have a hardship program or other assistance available to help borrowers who are struggling. Even if they don’t, simply talking with them and explaining your situation can be helpful in getting an idea of what options you do have.

Consider taking out a consolidation loan. 

Consolidation loans allow you to combine multiple loans into one loan with a lower interest rate. This can make it easier to manage monthly payments, and may also reduce the total amount of interest you’ll pay over time.

See if you can get a forbearance or deferment on your loan payments

Forbearance and deferment are both options that can help you temporarily stop making loan payments without penalty. These are typically only available for those facing financial hardship, so be sure to contact your lender to see if this is an option for you.

Consider other ways to make money, such as selling possessions or taking on odd jobs.

If you’re unable to make your loan payments, it may be worth considering other ways of making money. Selling possessions or taking on odd jobs can provide some extra cash to help cover your bills.

Make a budget and stick to it so you can get back on track financially

Creating a budget is one of the best ways to get back on track financially. Track your expenses, prioritize essential bills, and look for ways to save. This can help you stay afloat during this difficult time and make it easier to catch up on loan payments once you’re in a better financial position.

Seek out financial counselling or advice from a trusted source

If you’re struggling to make ends meet, seeking out financial counselling or advice from a trusted source can be helpful. This can help you gain perspective and understand your options in order to make the best decision for your current situation. 

Seek assistance from creditors, debt relief agencies and government programs

If you are unable to negotiate a payment plan with your lender or refinance your loan, you may be able to seek assistance from creditors, debt relief agencies or government programs. Speak with a financial advisor to explore all your options and determine the best course of action. 

Don’t ignore the problem – take action now

It’s important to remember that personal loan debt does not go away on its own. If you’ve lost your job and are unable to pay your personal loan, taking action now will help you avoid additional fees, damage to your credit score, or legal consequences. Speak with a financial advisor or contact your lender as soon as possible to discuss the best options for managing your debt. 

Also read :https://www.loansettlement.com/blog/can-bank-take-your-assets-if-you-default-on-a-personal-loan/

Loansettlement.com is India’s leading online loan settlement company and can help you with debt relief advice.

Register with us today at https://loansettlement.com/ to get started! 

Our team of experienced professionals can help you negotiate repayment plans with your lenders. 

In addition to offering tailored advice and guidance, Loansettlement.com also provides access to financial education materials that can help you make informed decisions about your finances. 

Whatever situation you are in, don’t hesitate to reach out for help with your loan payments.

We understand that everyone’s situation is unique, so we offer personalized advice and assistance that fits your specific needs.

With the right advice and assistance, you can get back on track and make progress toward becoming debt-free once again. 

Register with us today at https://loansettlement.com/ to learn more about our services and how we can help you! 

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What is a mudra loan and how does it work

Mudra loans are government-sponsored small business loans that allow people to borrow up to 10 lakh without any collateral. The loan is provided by banks and non-banking finance companies. The repayment period varies depending on the lender, but generally, it can range from 12 months to 48 months.

Legal action against mudra loan defaulters

Legal action against mudra loan defaulters can be taken by the government. The borrower may be asked to pay back the full amount of their loan plus interest and penalties. The government also has the right to file a civil suit in court and pursue criminal proceedings against defaulters.

In addition, the government can take action against the guarantor of a mudra loan if they are unable to pay back the full amount. The guarantor may have to forfeit any property or assets pledged as collateral, and can also be asked to make good on the entire loan amount.

How to avoid being declared a mudra loan defaulter

To avoid being declared a mudra loan defaulter, it is important to ensure that you are making your payments on time and in full. If you are unable to make a payment, contact the lender as soon as possible to discuss an alternative repayment plan. It is also important to keep track of all your financial commitments, including mudra loans, and to make sure that you are not over-borrowing. This will help you to stay on top of your financial commitments and avoid any potential legal action. 

The consequences of being a mudra loan defaulter

If you are declared a mudra loan defaulter, there can be serious consequences. Aside from the legal action mentioned above, your credit score will also suffer and this could make it difficult for you to obtain further loans in the future. Furthermore, if the government pursues criminal proceedings against you, this could result in fines or even imprisonment. 

It is therefore important to understand the implications of defaulting on a mudra loan and to avoid it at all costs. Making regular payments on time, staying within your borrowing limit, and always making sure you have sufficient funds available for repayment are essential steps in avoiding legal action. 

What to do if you are having trouble making your payments

If you are having trouble making your payments, it is important to contact the lender as soon as possible. They may be able to offer alternative repayment plans that can help you get back on track. Additionally, if you are facing financial difficulty due to unexpected circumstances such as a medical emergency or job loss, you can contact the relevant government authorities for help. They may be able to provide you with grants or other forms of assistance to help you get back on track. 

If you are facing difficulty in making your payments, it is best to seek professional advice and take action to avoid defaulting on your loan. Loan settlement can be a good option in such a situation.

Loan settlement means negotiating with the lender to reduce the amount you owe and setting more favorable terms of repayment. This can help you avoid legal action and resolve any financial difficulties quickly. 

Need help? Register at https://loansettlement.com/

Loansettlement.com is a platform that helps borrowers to negotiate with their lenders and get loan settlement agreements. 

Their experienced professionals will assess your situation, negotiate with the lender on your behalf, and help you settle your loan quickly and easily.

We also offer anti-harassment services to protect you from any unfair practices by your lender.

So if you are facing difficulty in paying back your mudra loan or are already a defaulter, register with Loansettlement.com and get help. 

With the right guidance and support, you can avoid legal action against mudra loan defaulters and resolve any financial difficulties quickly and easily. 

Register on the website https://loansettlement.com/ now and take advantage of our professional loan settlement services.

Also, Read The Punishment For Non-Payment Of Personal Loans In India 

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What are the consequences of being a personal loan defaulter?

Being a personal loan defaulter for 10 years can have serious consequences. 

Your credit rating will likely be severely impacted, and you may not be able to get approved for any new lines of credit until you start rebuilding your score. 

Additionally, if the loan is secured by your home or other property, the lender could take action to seize the property if the loan is not repaid. 

Therefore, it’s important to take steps to repay the loan and start rebuilding your credit as soon as possible.

What precautions should you take when applying for a personal loan?

When applying for a personal loan, it’s important to take precautions. 

You should always read the terms and conditions of the loan carefully before signing anything, as this will help ensure that you understand all of the details. 

Additionally, make sure that you are comfortable with the amount of money you are borrowing and can afford to make payments on time. 

Finally, make sure that you are honest on your loan application and disclose any past defaults or issues with paying back loans. 

By taking these precautions, you can ensure that you get the best deal possible on a personal loan. 

How to get back on track after 10 years of defaulting on a personal loan

It is possible to get back on track after 10 years of defaulting on a personal loan. 

First and foremost, you should contact your lender to discuss payment plans and options for refinancing the loan. 

Additionally, it’s important to make sure that all of your payments are current. This will help you begin rebuilding your credit history and score. 

Additionally, you should research the best personal loan options for those with bad credit, as this can help you get more favorable terms on a new loan. 

With some effort and patience, it is possible to get back on track after 10 years of defaulting on a personal loan! 

What should you do if you’ve been a personal loan defaulter for 10 years?

If you’ve been a personal loan defaulter for 10 years, there are some steps you can take to improve your situation.

Steps to improve your credit score

First and foremost, it’s important to make sure that all of your payments are up-to-date. This is the first step in rebuilding your credit history. You should also contact your lender to see if they are willing to work with you on a payment plan. This can help you get back on track and start rebuilding your credit history.

Tips and strategies for managing debt

Once all of your payments are up-to-date, it may be time to look into refinancing your loan. Refinancing can help lower your interest rate and monthly payments, making it easier for you to stay on track with your payments. Additionally, if you have built up some equity in the property, you may be able to use this to refinance the loan and get a lower interest rate.

Find the best personal loan options for those with bad credit

Finally, it’s important to look into finding the best personal loans for people with bad credit. There are many lenders that specialize in providing bad credit loans, so it’s important to do your research and find the best one for you. Be sure to compare rates, terms, and other factors so that you can get the most favorable loan for your situation. With some effort and patience, you can rebuild your credit history and start on a path towards financial freedom!

In case you are struggling to repay your personal loans, consider loan settlement as an option!

Loan settlement is a process wherein you negotiate with your lender to accept an amount which is lower than the full principal balance amount that is due. This can help you reduce your debt burden and make repayment easier. To ensure a successful negotiation, it’s important to have an understanding of the loan agreement, credit history and all other documents related to the loan so that you can make informed decisions. Additionally, it’s important to be aware of the legal implications of loan settlement and how it will affect your credit score in the long run. 

By considering loan settlement as an option, you can make sure that you are taking the best steps towards financial freedom after 10 years of personal loan defaulting. 

Take help from a professional Loan settlement company

If you are finding it difficult to negotiate a loan settlement on your own, it might be worth considering taking help from a professional loan settlement company. These companies will have experience in dealing with lenders and negotiating the best possible deal for you. Furthermore, they can provide guidance and advice throughout the process to make sure that you get the best outcome possible.

Loansettlement.com is India’s leading debt settlement company, having helped thousands of customers resolve their debt issues. 

We work with lenders to negotiate a settlement amount that is lower than the original loan amount, helping you save money and avoid hefty late payment fees.

Our team of experts will guide you through the entire process, from understanding your current financial situation to negotiating with your lender for a reduced repayment plan.

Resgister at https://loansettlement.com/ and learn about our services!

Ultimately, if you have been a personal loan defaulter for 10 years, don’t despair – there are ways to get back on track and restore your credit history. With some effort and patience, you can find the best personal loans for those with bad credit and start rebuilding your score today. Good luck!

Also, Read How to Protect Your Rights as a Loan Defaulter in India

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What are the consequences of loan default in India?

There are several possible consequences for loan default in our country.

Your credit score can be affected, making it difficult to borrow money in the future. You may also face legal action from creditors, including seizure of your property or assets.

Know your rights as a loan defaulter

It is important to know your rights as a loan defaulter in India. Under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, banks have the right to take possession of property given as collateral against the loan. However, they must follow certain procedures before doing so. For example, they must give you at least 60 days’ notice before taking possession of any property.

How can you protect your rights as a defaulter?

Send a letter of demand

If you have defaulted on a loan, it is important to send a ‘Letter of Demand’ to the lender. This should include details such as the amount owed and interest rate, date of last payment made and date of default. It should also include details of any assets given as collateral, such as property or vehicles.

Seek legal help

If you are being harassed by creditors or feel that your rights are not being respected, it is important to seek legal advice and assistance. There are a number of organizations in India offering free legal aid services to low-income individuals.

Consider debt restructuring options

If you are struggling to repay your loan, it may be possible to restructure the debt in order to make repayment more manageable. This could involve stretching out payments over a longer period of time or reducing interest rates. It is important to seek advice from a financial advisor before entering into any debt restructuring agreement.

By following the steps outlined in this blog post, you can protect your rights as a loan defaulter in India and ensure that your creditors respect your rights. It is important to remember that you have legal rights and should not be subjected to harassment or unfair treatment from creditors. If you are feeling overwhelmed by debt, do not hesitate to seek legal advice or explore debt restructuring options. 

With the right help, you can get back on track and take control of your finances.

What should you do if you’re being harassed by debt collectors or creditors?

If you are being harassed by debt collectors or creditors, it is important to take action. 

Start by sending a written complaint to the collector or creditor, detailing your grievances. Keep a copy of this letter for your own records.

You can also contact the local consumer court and file a formal complaint about any unfair practices employed by the collector or creditor. This is a good way to get the attention of authorities and ensure that action is taken against any wrongdoing.

It is also important to seek legal advice if you are being harassed by debt collectors or creditors. A lawyer will be able to review the situation and advise you on your rights and options. They can even provide assistance in filing a complaint with the consumer court.

Finally, remember that you are not alone and there are resources available to help you deal with debt collectors or creditors who may be violating your rights. 

Don’t hesitate to reach out for assistance if you need it. 

What are the other options available to loan defaulters in India?

Other options available to loan defaulters in India include debt consolidation, bankruptcy, and consumer credit counseling. 

Debt consolidation 

It is a process of combining multiple loans into one loan with a lower interest rate and monthly payment. This can help to make repayments more manageable. 

Bankruptcy 

It is another option available for those who are unable to manage their debt. However, it is important to note that this should be considered as a last resort. 

Consumer credit counselling 

It is also available for loan defaulters who need help with budgeting and managing their finances more effectively. A credit counselor can provide advice on how to make payments and can even negotiate with creditors on your behalf.

Loansettlement 

It is a good option for loan defaulters who owe a large amount of money. This involves negotiating with creditors to reduce the amount you must pay, which can often lead to greatly reduced payments and even a waiver of some or all interest charges.

Loansettlement.com is a leading loan settlement company in India dedicated to helping loan defaulters in India protect their rights and get back on track. They provide advice and resources for individuals struggling with debt, as well as information on legal rights and options. 

Consider debt settlement companies such as Loansettlement.com for assistance in managing your debt and improving your financial situation. 

With the right help, you can protect your rights and take control of your finances. 

Register at https://loansettlement.com/ and take the first step towards financial freedom today. 

By following the steps outlined in this blog post, you can be aware of the rights of loan defaulters in India. It is important to remember that you have legal rights and should not be subjected to harassment or unfair treatment from creditors. Seek advice from experts and explore debt restructuring options if necessary.

Also, Read What is the Legal Action Against Mudra Loan Defaulters?

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Check your CIBIL score and credit history

The first step is to check your CIBIL score and credit history. This will give you an idea of where you stand, and what kind of loans you may be eligible for. If you see any errors on your report, be sure to dispute them! If your score is lower than you’d like, don’t despair – there are still things you can do to improve your chances of getting a loan.

Also read- Is it possible to get my name removed from CIBIL Defaulter’s list?

Here are five tips to help you get a personal loan with a bad CIBIL score:

Shop around for lenders who specialize in bad credit loans and compare their interest rates

There are many lenders out there who are willing to work with people with less-than-perfect credit. When you’re shopping for a personal loan, it’s important to compare interest rates from different lenders. This will help you ensure that you’re getting the best deal possible.Be sure to also compare other terms and conditions, such as fees and repayment periods.

And remember, just because you have bad credit doesn’t mean you have to accept a high interest rate. If you shop around, you should be able to find a loan that’s both affordable and manageable.

Be honest about your credit history and financial situation.

When you apply for a loan, the lender will pull your credit report. If you try to hide anything, it will only come back to bite you later on. Be upfront about any financial difficulties you’ve had in the past, and be clear about your current financial situation.

Provide documentation to support your case.

If you have a low CIBIL score because of extenuating circumstances, be sure to document them! This could include things like medical bills or a job loss. The more documentation you can provide, the better your chances will be.

Offer collateral and have a co-signer

If you have any assets that you can use as collateral, this will help you get approved for a loan. Lenders are always more willing to lend money if they know they have something to fall back on.

If you know someone with good credit who is willing to co-sign for you, this could improve your chances of getting approved. Having a co-signer shows the lender that someone else is willing to vouch for you, which can make them more likely to approve your loan.

Improve your credit score before applying for a personal loan

If you’re not able to get a personal loan with bad credit, don’t worry – there are still things you can do to improve your chances. One of the best things you can do is work on improving your credit score.

• There are a few different ways to do this, but one of the most effective is to make all of your loan payments on time. This will show lenders that you’re a responsible borrower, and it will help improve your credit score over time.
• Another way to improve your credit score is to use a credit-builder loan. These loans are designed to help people build their credit, and they can be a great option if you’re having trouble getting approved for a traditional loan.

Applying for a personal loan with bad credit can be challenging, but it’s not impossible. If you follow these tips, you’ll be in a much better position to get approved!

Also read- Is it possible to get my name removed from CIBIL Defaulter’s list?

In case your are struggling with the repayment of your loans and also want to improve your credit score, we can help!

Loansettlement is India’s leading loan settlement company.

• If you are struggling with the repayment of your loans, we can help you by negotiating with your lender.
• We can also help you by negotiating a settlement of your loan so that it is more affordable for you.
• We can also help improve your credit score by advising specific action steps that you can take such as correcting errors in your credit report and improving your payment history.

If you are interested in learning more about how we can help, please register with us today at https://loansettlement.com/

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Loan default and its consequences

When you take out a loan, you are agreeing to repay the borrowed amount plus interest and fees over a set period of time. If you fail to make your payments on time, you will be considered in default. This means that the lender can take legal action against you in order to recoup their losses. In some cases like secured loans, the lender may even be able to seize your assets, such as your home or car.

Defaulting on your loan can have a major negative impact on your financial life, and it should be avoided at all costs. Not only will you end up owing the lender a large sum of money, but you will also damage your credit score. This can make it difficult to get approved for future loans, and you may even have trouble finding a place to live or a job. If you are struggling to make your loan payments, reach out to your lender as soon as possible to discuss your options. It is better to work with them or with professional to find a solution than it is to default on your loan!

Also read- 10 tips to manage your finances

How to avoid loan default?

There are a few things you can do to avoid loan default.

First, make sure that you only borrow an amount that you can realistically afford to repay.

Second, create a budget and stick to it so that you know exactly how much money you have available each month for your loan payments.

Third, consider setting up automatic payments from your bank account to ensure that your payments are always made on time.

Finally, stay in close communication with your lender if you are having trouble making your payments – they may be able to work with you to create a more manageable payment plan.

Also read- Is it possible to get my name removed from CIBIL Defaulter’s list?

What to do if you’re struggling to make your payments

If you’re struggling to make your loan payments, the first thing you should do is contact your lender. They may be able to work with you to create a more manageable payment plan. If you’re still having trouble, there are a number of organizations that can provide financial counseling and assistance, such as Loansettlement.com

Consider loan settlement to avoid default

If you’re struggling to make your loan payments, you may want to consider loan settlement. This is an agreement between you and your lender where you agree to pay a lump sum that is less than the full amount of the loan in order to settle the debt. Loan settlement can be a good option if you are unable to afford your monthly payments but can afford a one-time payment or a lower EMI. It is important to note that loan settlement will affect your credit score, so it should only be considered when you have no other solution. If you are considering loan settlement, you can contact an organization like Loansettlement.com for assistance.

No matter what your situation is, defaulting on your loan should always be avoided if at all possible. If you are struggling to make your payments, contact your lender immediately and explore all of your options before default becomes inevitable. With a little bit of effort, you can avoid the serious consequences that come with loan default.

FAQs about loan default

Q: I’m in default, what should I do?

If you’re in default, the first thing you should do is contact your lender to try and work out a payment plan. If you’re unable to reach an agreement, you may want to seek out professional help from a organization like Loansettlement.com.

Q: What will happen if I can’t repay my loan?

If you can’t repay your loan, the lender may take legal action against you and try to seize your assets in case of secured loans. It’s important to remember that defaulting on a loan can have serious consequences, so you should always try to avoid it if at all possible.

Q. What are the options if I am struggling to repay my loan?

There are a few options available if you’re struggling to repay your loan. You can try to work out a payment plan with your lender or seek professional help from an organization like Loansettlement.com to settle your loans your debt.

Q. Which is the best Loan settlement company in India?

Loansettlement.com is the best loan settlement agency in India. They have a team of experienced professionals who can help you negotiate with your lender and get you the best possible terms for repayment.

The post What is loan default and why should you avoid it? appeared first on Loan Settlement.

What is CIBIL and what does it do?

CIBIL is a credit information bureau that keeps track of an individual’s credit history. This information is then used by banks and financial institutions to assess an individual’s loan eligibility. If you have defaulted on a loan or credit card payment, your name will be added to CIBIL’s list of defaulters.

This can make it difficult to get a loan in the future, as most banks and financial institutions will not lend to individuals with a bad credit history.

Can I clear my credit history if I am listed as a defaulter on CIBIL’s website?

Yes, it is possible to clear your name from CIBIL’s list of defaulters. You will need to contact your bank or financial institution and arrange to repay the outstanding amount of Personal Loan or Credit card loans. Once you have done this, your name will be removed from CIBIL’s website.
It is also important to note that you can improve your CIBIL score by making regular payments on time. This will show banks and financial institutions that you are a responsible borrower and will help to improve your chances of getting a loan in the future.

How can I get my name removed from the Defaulters list on CIBIL’s website?

Fortunately, there are a few things you can do to get your name removed from CIBIL’s list of defaulters and improve your credit score.
First, you should try to contact the bank or financial institution that you have defaulted on a payment with and arrange a repayment plan.

While it may take some time and effort, it is possible to get your name removed from CIBIL’s list of defaulters. By taking the necessary steps and working with the right people, you can improve your credit score and get back on track financially.

If you are still struggling to get your name removed from CIBIL’s list of defaulters, you can take professional help. There are agencies which specialize in helping individuals improve their credit score and remove negative items from their credit history.

If you have any further questions, please feel free to contact us. We will help you to negotiate with your banks to settle your loans at 50% or less and will also help you to improve your credit score.

Register Now to get a call from our legal and financial advisors.

Thank you for your time!

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Reasons for Loan Default
Loan default can occur for a variety of reasons, including,
1. loss of employment
2. Recession in the economy (in case of self employed)

Consequences of Default
According to Reserve Bank of India (RBI) regulation, banks consider a loan to be in default after 90 days of non payment from a borrower. i.e., after 90 days loan is classified as Non Performing Asset as per RBI guidelines.“In the event of a three-month failure to pay consecutive Equated Monthly Instalments (EMI), lenders have the right to send payment reminders.” In the event that payment is not made despite repeated reminders, the lender may begin the process of auctioning the property to recover the debt.

Some of the consequences of default are as follows:
1. In case of failure to repay loans and, if no satisfactory solution is found, the borrower
may face legal consequences in India.
2. There are two types of loans: secured and unsecured. In the case of a secured loan, the
security, such as a house or a vehicle, is confiscated or taken in lieu of the loan.
However, in the case of an unsecured loan, such as a personal loan, the person may be
placed on a loan defaulters list, which will reflect in the credit history, affecting the
person’s ability to purchase anything on credit and banks can file a civil or criminal
lawsuit against the borrower.
3. The person may also be charged with cheating under Section 420 of the Indian Penal Code, which carries a maximum sentence of seven years in prison and a fine.

Possible Solutions in case of Default
In case of genuine inability to pay the loan for particular period of time, due to loss of job etc,
there is a possibility of negotiation. Some solutions include but are not limited to,
1. Communication and Negotiation with the Lender
Explain the reasons for the default and the lender will bring out possible solutions.
• It can be an extension from the lender to make the repayment.
• restructuring personal loan by extending the loan term and lowering the EMI.
• In the worst-case scenario, a settlement from the bank.
2. Credit card usage should be stopped or reduced.In case of loss of work (unemployment) or if the employer reduces the salary, halting or reducing the use of credit cards for day-to-day expenditures. “Regular usage of credit cards with no income due to job loss or drop in income may result in an increase in credit card
outstanding month over month,”
3. Raise Funds by Disposing of Assets.
Underperforming investments should be liquidated to lessen the loan burden. In case nonperforming mutual funds or unit linked insurance plans (ULIPs) that consistently underperform benchmark indices, sell them and pay off the loan. When the loans have been outstanding for three years or longer, this is the best possible decision.
4. Defaulters Rights
There are certain rights given to a defaulter, whether he/she is a deliberate defaulter, or a
genuine defaulter. The RBI regulates banks and financial institutions. As part of their code of
commitment to their consumers, they are devoted to best practises. As a result, under the law,
banks or recovery agents assigned by banks are not permitted to threaten or abuse you.
5. Emergency Fund
The problem of default comes as a result of job loss or as other sources of money dry up.
Making a backup source that can be held in a savings account or in the form of fixed deposits
or Creating a contingency fund that includes at least three months’ worth of EMIs can thus
come in handy in uncertain times and prevent the person from defaulting altogether.

If you have defaulted on your loan repayments, consider loan settlement. Register and talk to our counsellors for more information.

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The share of small-ticket loans in personal loans has become five times in the last 2 years which were only 12.9% of the personal loan segment. By March 2020, these rose to around 60%.

A credit of below ₹ 50000 is termed as a small ticket personal loan and this segment has been driving volumes, and growth has been as high as 162% in 2019-20. The primary reason is app-based lenders who entered the market in recent times.

Unfortunately, such loans have seen the maximum stress. A credit bureau CRIF High Mark released a report which states that fintech and neo-age lenders are targeting young, low-income, digitally adept customers who have short term credit needs but have limited or no credit history. The high growth and fishy recovery practices adopted by the app-based lenders compelled RBI to issue a stern warning.

One of the salient features of payday loans (repaid once the salary is credited) is the high-interest rates which hover around 15% per month, which provides the opportunity for lenders to operate even when the defaults are around 10%.

CRIF High Mark reports states that the average ticket size has reduced consistently in the last 2 years, declining by 18% year-on-year by March 2020 even when there has been growth in the portfolio.

If you are planning to take a small loan through these new age loan apps, be very careful before you go ahead. Check the terms and conditions and interest rates and evaluate the background of the company carefully. Don’t get into a debt trap with high interest rate loans that seem easy to get but are toxic in the long term.

If you want to get out of the debt trap, consider loan settlement. Register and talk to our counsellors for more information.

The post Zooming small personal loans increasing financial stress and defaults appeared first on Loan Settlement.