Posted on Friday August 23rd, 2019

Everyone has taken loan at some point of life to finance some major events in life such as purchasing a new car, buying a new home or paying for a medical emergency. Securing a loan helps us circumvent the lack of large sums of liquid cash. We have to pay the loan amount along with interest rates in monthly installments. Sometimes because of certain circumstances, we are unable to repay our loan in a timely manner. There are some major consequences of failing to repay your loan. If you default on your installments, your credit score will be adversely affected. This will make taking loan in future for you impossible. The assets which were used as collateral for Securing a Loan can be repossessed by lender and auctioned after following a legal process to overcome the outstanding dues. Let’s take a look at your rights as a loan defaulter or what options you should take if you fail to repay the loan. There must be reason why you haven’t repaid your loan and if you are unable to make the payments, you could consider one of these options.

• DEFER YOUR PAYMENTS: You should inform your bank about the inability to make the payments or seek an EMI break for a few months. This situation can occur during a job change or a loss in the business. Lender can accept these as genuine reason and can impose some penalties for the deferment.

• REDUCING THE EMI: If you find your EMI amount as a burden, consider having the monthly outgo small. You can request your lender to increase the loan tenure but ending up in a higher amount of interest. But once your finances get sturdier, you should increase your monthly outgo.

• RESTRUCTURING THE BORROWING: If you are unable to maintain the terms and conditions of your loan, you can request the lender to relax the same. This may lead to a reduction of charges, increasing the loan tenure, decreasing the interest rate etc.

• ONE-TIME SETTLEMENT: When you are unable to repay your loan to the extent that your interest accrued is larger than principal amount then this option is exercised. You may get the option to settle the borrowed amount through a small payment. But this exercise will reflect the fact that you hadn’t repaid your loan fully, therefore your credit score will be affected.

For getting back to financial health, analyze your situation and work out with lender to frame out your repayments. Try to control your expenses and priorities between essential and non-essential spending. These savings will add up to a bigger amount that will get you closer to Repay Your Loan. Repaying the lender to the full extent is not only your legal responsibility but also a moral duty. You can seek these options for easing the situation temporarily but ensure that you are going to clear all your dues and do not let your credit worthiness be harmed.