Life is unpredictable which implies that bad days never come with prior notice. Monetary emergencies don’t provide an advance warning and given this economic delay, you can never predict when you would possibly lose your job or face business losses. God forbid in such a case maybe you will not be ready to repay your loan for a month or two. Defaulting on loan EMI payments may damage your credit score and it might create hurdles for obtaining another loan in future.
In case you are facing such a situation where you are unable to pay your loan don’t panic. First you need to know your rights as a borrower to make sure that you are not being taken advantage of and are not being harassed.
Banks, NBFC’s and Financial institutions have a legal responsibility to follow a process when their customer defaults a loan.
Here we will discuss few rights of a borrower and what steps a financial institution can take to recover the money borrowed –
– Lender need to follow defined process: In case a borrower default in the payment, all lenders should follow a due process while initiating proceedings to recover the dues. Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (Sarfaesi) Act, mortgaged assets can be repossessed by the lenders after giving adequate notice to the borrower.
– Notice to the borrowers: A loan account can be termed as a Non Performing Asset (NPA) only if the borrower fails to pay EMI continuously for 3 months’ time (90 days). In such a case, lender needs to issue a 60 days- notice to the borrower before recovering the asset. In case of selling the asset, another 30 day public notice should be given by the lender.
– Fair Asset Valuation: Asset valuation should be fair and it should be according to market value of the asset. In case of auction, lender must specify the reserve price, date and time to the borrower. In case the borrower feels that the asset is undervalued then borrower also has the option to look for a buyer and introduce them to the lender.
– Human treatment: Lenders mostly engage recovery agents to push borrowers for repaying their loans. However, borrowers should know there are certain rules that they need to follow. These agents cannot violate the norms of the decency and civil behavior during their visits. Borrower has the right to inform the lender in case of any humiliation.
As a borrower, your primary focus should be making timely loan repayments. In case of unforeseen situations where you are unable to pay your EMIs you can always speak to your lender for support. Notifying them and convincing them of your intention to pay off the loan, might help you coping up with the financial situation.
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