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Yogi Zone

Useful articles for your finance management by our team of experts

Bank defaulter list – How not to be in it

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bank loan defaultersBank loans play an important role in fulfilling your financial dream. They help you enjoy exotic holidays and serve you well in medical emergencies. Imagining life without a loan is quite difficult now a day as it’s difficult to bear costs related to house, vehicle, education and holidaying at one go. You enjoy all the benefits simultaneously by paying EMI’s which are quite small as compared to total cost involved. But in case of emergencies like job loss or medical problems, people face difficulty in paying EMI’s. Inability to pay EMI’s on time will tag you as a defaulter and your credit score will go for a toss. If you fall in such a situation and are on the verge of defaulting on your EMI, do not panic, as you can negotiate with the bank to find a solution. Through this article, we will try to explore what are the options so as to avoid a default and maintain your credit worthiness.

What is Loan Default?

In simple terms, default occurs when a debtor (who has taken the loan) fails to pay back the loan or has not made a scheduled EMI payment, either willingly or unwillingly. We will be discussing the case where debtor is willing to pay, but is not in a position to pay because of job loss or other emergencies.

What are the options?

You are on the verge of defaulting on the loan because of reasons like higher EMI, job loss, medical emergency or business loss. Intentionally, you do not want to default and lose your credit rating. What to do in such a scenario? There are various options which you can explore such as:

1.Increasing tenure of the loan – In case the EMI burden is too heavy, negotiate with your bank so as to increase the tenure of loan. Increasing the tenure will reduce the EMI and you will avoid defaulting on the loan.

2.Deferring EMI payment – You can negotiate with the bank to defer EMI payments for a certain period of time in case of emergencies like job loss. Normally, banks do not deny genuine customers, but you need to pay some deferment charges in such conditions.

3.Loan against PPF or FD – If interest burden is high and you are finding it difficult to pay EMI, you can opt for loan against FD or PPF as they are available at cheaper interest rates. You can use this amount to prepay higher interest loan and continue paying EMI’s for loan against FD or PPF with reduced EMI burden. Be ready to pay pre-closure charges in this case.

4.For Home Loans – You can ask your bank to increase the tenure of home loan if the EMI burden is unbearable. Normally home loan tenure can be increased by one year.

Conclusion

Negotiation is the keyword here. You just need to sit with bank officials and search for a viable solution. You can choose the most suitable option from above and can easily avoid defaulting on the loan. Keep in mind, default will damage your credit history forever, leading to financing problem in the future.

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