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What should I do if I have defaulted in my Loan Repayment in past?

Repaying a loan in time and keeping up with the EMIs payment is important for availing future loans and also to have competitive terms of borrowings, like lower interest rate, extended period of credit, higher amount of loan, etc. However, It's possible that due to unavoidable circumstances one may default in payment of an EMI or series of EMIs. Such defaults of payment of EMI/s is quite worrying and you may probably be wondering what the consequences will be or how to overcome from consequences of such defaults.

Running away from payment of EMIs is no way an option. If because of any genuine hardship, there is a delay or default in payment of EMIs; one should take prompt actions to inform their lenders for such delay / default and the likely plan to repay such EMI/s and future EMIS. Banks/lending institutions do understand that at time there could be genuine reasons because of which the borrower may be unable to make timely payments. If any borrower default in his / her loan repayments, lending institution checks the past payment history to analyze the behavior of the default and borrowers. If the past repayment history is good, they do consider the request of the borrowers as per their policy and circumstances. However, if they find the issues as intentional and regular defaulter, they take all legal actions, including informing Credit Bureaus and filing money / criminal cases (Sec 138 of Negotiable Instruments Act) for appropriate redressal and recovery of their loan.

Lending institutions are more likely to consider your situation if you have always paid your EMIs in time before the things took an unfortunate turn. Based on how genuine your intent and case is, the bank may look for various feasible solutions that are mutually acceptable. Lending institution normally explain the borrowers about the impact on credit score which will get drop significantly after defaulting on a loan, which will make it more difficult for you to get any fresh loan in the future. Even if a lending institution is willing to take a risk on your default profile then the interest rate will be much higher than it would be for someone with good credit score and history.

If your financial situation is such that there is likely to be a improvement in your cash flow going forward because of a change in job or any other reason, you may seek temporary relief from the lending institution for a month or two. The lending institution may permit the same but may charge a fee / penalty for not paying your due EMIs within the time frame agreed upon earlier.

In such situation, its advisable to be sincere and honest in communicating the lending institution about your situation with firm planning of repayment proposal. If you express your desire to pay back and notify the lending institution about your current financial condition, lending institution may be willing to give you the option of a one-time settlement or suitable time for payment of EMIs. All these are subject to your past payment history, and the guidelines / polices of the lending institution and their comfort in providing such relaxation. This is normally done on a case-to-case basis.

If none of the above options work, after giving you time to repay your dues, the lending institution will take the next step. Lending institution will initiate legal process under section 138 and further notice from the court to secure the lenders position.

Remember, your intent to pay off the loan should be evident to the lending institution. So be wise and talk to their representative the moment you realize that you will not be able to meet your obligations.Never wait till things get really bad.

The author is Marketing Head of The article written by him is in his personal capacity and educational in nature. All the views are his personal views., the peer to peer lending platform has placed (promoted) the articles to benefit the general borrowers and lenders. You may write to author for your quarries at referring the article name and your details. is India's leading RBI (Reserve Bank of India) registered NBFC-P2P, providing technology enabled e-commerce platform to it's Lenders and Borrowers to avail their loan at a highly competitive Rate of Interest, in a hassle free manner without much of documents; at the same time it provides its Lenders Higher return on their capital by providing opportunities to lend to good quality, well assessed borrowers.


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