What choices you have when you cannot repay the loan amount?

Many of us working class individuals have taken loans at least once in a lifetime. These loans have been taken for so many reasons like;

Purchasing a new house- (Home Loan)

Funding child’s education – (Loan Against Property)

Medical emergencies – (Personal Loan)

Boosting your business – (Business Loan)

And many more!

As human beings, we have a lot of wants and needs. Our income is not enough to fulfill all our needs. Hence we use the facility given by Banks and NBFCs of taking different kind of loans. These loans come at a rate of interest which you must repay in full till the tenure ends.

Sometimes it is not possible for the borrower to repay the loan amount. This can happen due to multiple reasons like job change or some emergency where you had to liquidate all your assets. In such a scenario, there are few choices you have. You can opt for these choices immediately so that you can sort out this debt problem.

Further reduce your current EMI

When you are struggling to pay the loan EMI amount each month and have begun defaulting on it, your best option is to visit your bank and explain the situation to them. Ask them to offer you a reduced EMI option where you will pay a lesser EMI than you are currently paying. Yes, the interest amount will go even higher than before. Once your condition gets better, you can visit your bank again and ask them to increase the EMI amount.

Restructure your loan conditions:

If your condition is very bad, then you can visit the bank and discuss your case with them. You can ask them to reconsider your loan conditions. These conditions can be related to increasing the term of your loan, reducing the interest rate, reducing penalty amount etc. However this can only happen when you have been a disciplined borrower who has paid all previous EMI’s on time. Also this decision is solely on the discretion of the bank.

Deferring payment option:

Sometimes, the borrower might change his/her job or is unable to pay the loan EMI just for a couple of months. In that case, he/she can visit the bank, discuss their case and ask them for a deferred payment option. In this option, you are exempted from paying EMI for few months. Until then, you can arrange for cash by getting a new job etc. However you need to remember that if you do get this option, the bank will definitely charge you certain penalty fees.

Full and final settlement:

When in cases of an emergency which the borrower is affected with, they might have no or less money remaining. In such cases, their defaulted amount, penalty charges and EMI pending keeps increasing. You can go to the bank and ask them for a one time settlement. It is possible that the bank might exempt a huge chunk of the amount if you can pay a smaller amount. However the only downside here is that your credit profile will be affected severely as it will be shown that you were not able to fulfill your debt obligation and had to do a onetime settlement.

These are the choices you have when you cannot repay the loan amount.

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