What to do When You Default on a Loan?
April 09, 2018
It’s not easy to get a loan these days. However, it’s even more difficult to repay one, especially since the cost of living is quite high in the metro cities and other urban cities. So, despite the people trying their best to clear the debt, many fail and end up defaulting.
Nothing is scarier than defaulting on a loan, especially when you have secured it with a house or a car. However, is it really the end of the world? Not at all.
The Truth About Loan Defaulting
Loan defaulting is more common than you think. However, the good thing is that the lenders understand that there are often genuine reasons behind the same such as medical issues, job loss, etc. So, instead of running away from the problem, you can directly contact the bank and explain your situation.
The following are some of the most common options given to the loan defaulters:
This is a really popular solution for loan troubles. In this, the bank restructures the debt so that the monthly EMIs become smaller at the cost of a longer tenure. This way the debt burden is reduced and you can repay the loan with ease.
2) Deferred Payment
If your problem is temporary such as job loss, then you can request your bank to offer a “grace period” i.e. allow putting off the payment without repercussions. And when you are back on your feet, you can finally make the payment and stick to the schedule once again.
3) Debt Settlement
This should be considered as the last resort because although it offers instant relief, it has consequences.
In this, your bank can allow you to pay only a small portion of the actual debt to close the account once and for all. However, the problem is that this will greatly affect your credit rating, and if you need a loan in the future it will be nearly impossible to get one.