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Understanding Loan Default – What Happens and how to handle Loan Default

Defaulting on a loan negatively affect your CIBIL Score and reduces the chance to apply for a loan in future. Read more to know your options as a loan defaulter. Learn More: http://www.banknomics.com/

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Understanding Loan Default – What Happens and how to handle Loan Default

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  1. Understanding Loan Default – What Happens and how to handle Loan Default Everyone face ups and downs in their life. We all need money to make our life luxurious, independent and convenient in the every phase of life. Sometimes critical events also come in the life where we feel helpless due to cash shortage. To make the financial condition better and fulfilling the requirements of our life we take help from the lenders. Most of us choose to go for a loan to make our ordinary events memorable. We apply for loan to finance the most awaited events of life like buying car or Home, Marriage, Family trip and much more. Loans from Bank or NBFCs help us in the critical moments of life like accidental or medical emergencies. Loans come with moderate to hefty interest rates in term of EMIs whether it’s Home Loan,Personal Loan, Car Loan, Business Loan or any other loan. Circumstance never ends and it’s possible that once fails to repay the loan amount on time. This affects the relationship between the lender and borrower. Usually it happens with Private lenders or NBFCs. www.banknomics.com

  2. If the borrower fails to repay the loan then they can face defaulting on the loan. It’s quite important for a borrower to understand the consequences of loan defaults. Have a look and understand the tips to avoid it. Outcomes of Loan Default The worthiness of a borrower is defines on the basis of their CIBIL Score. Bank and NBFCs approved your loan application only if your CIBIL track is good enough. www.banknomics.com

  3. Because CIBIL score is a key feature of loan approval, defaulting on a loan affects it. If the borrower fails to repay the loan amount within the tenure then it negatively affects by damaging CIBIL Track of Borrower. In case of secured loans, Banks ask for some collateral/security against the loan amount. If the borrower defaults on loan then the lenders can liquidate the assets to repay the rest loan amount. Defaulting on a loan can decrease your chance to apply for a loan in future too. Steps to follow to get rid of Loan Default There are many challenges and tough times come in the life that hits you hard on your pocket. Sometimes we have valid reason about unable to pay the EMI. It has been noticed that people looses their job, medical emergencies, Home requirements or urgent educational need usually defaults on the loan. If you too have such genuine problems and unable to repay the EMIs on time then consider following steps to avoid the defaulting on loan: Step 1: Talk to your lender and request to defer the EMIs In case of job loss, job change, loss of business or employment, inform your lender quickly and explain your circumstances and request for an EMI relaxation www.banknomics.com

  4. for a few months. Bank and NBFCs often accept such requests with genuine reason but they charge a penalty for deferment. Step 2: Request to increase the loan tenure: You can request to your lender to increase repayment period of the loan amount. It may decrease the EMI on the loan. It will help you monthly outgo but increase the amount of interest. Once you feel better about your financial condition then you can increase your EMI again. Step 3: Restructure or transfer of loan: You can also request for the restructuring of your loan. It can help you in the reduction of the charges, interest rates, and loan tenure as well. In fact you can request to transfer your high-interest loan into a low-interest rate loan. Compare the running interest rates of different lenders and transfer your loan as per your convenience. Step 4: One Time Settlement (OTS): Banknomics never suggest you or anyone to follow this step. It may close the door of applying for any loan in future or a borrower can face difficulty in future www.banknomics.com

  5. to apply for a loan. You can use this as the last option to avoid defaulting on the loan. This will also negatively affect your CIBIL score and reduce your worthiness to apply for a loan in future. In case of bankruptcy or disability to repay the rest loan amount you can opt this option. A borrower can settle their loan by paying a significantly smaller amount of the loan. You can get some legal help to get out from defaulting on the loan. Never apply for a loan beyond your repayment capacity. Banknomics suggest every borrower repay the loan with clearing all dues. This will improve your Worthiness and CIBIL score as well. In some difficulty, you can opt above steps to avoid the defaulting on the loan. www.banknomics.com

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