The reason why you should avoid loan default
Are you under the shadow of taking loans from banks and NBFCs? If yes, then this informative article will help you from avoiding the problems of loan default and repaying your loan on time. Let me give you a vision of how to avoid defaulting on your loans. Whether you call it a debt trap or loan default, debt traps are a very common occurrence in today’s time. As COVID 19 adversely affected the shore, many were struggling to cope with their finances. It was evident how important a loan had become since it served as an important gesture in everyone’s life. Loan and instant money are still the gate to heaven, but little did they know, it is the reminder to hell of huge extra charges and constant calls from recovery agents, if ignored.
What are loan defaults?
People have started to realise how important it is to repay your debts taken from banks and NBFCs, or from online lenders. It is the primary responsibility of the borrower to make timely repayments of any loan. Failure or neglecting to repay the loan can contribute to loan default. Many borrowers ignore their repayment obligations and fall into the category of loan defaulters.
It is an untold truth that missing out even a single list can affect your credit report, and it can even have a negative impact on your credit score.
What happens if the loan defaults?
Your repayment of loans is an indication of your credit health that depends on how your credit reports are received from credit bureaus. For instance, if you forget to make a repayment on time, but have paid it after your due date, it would be considered as a late payment.
A default in loan repayment for a period of 30 to 60 days will have a significant impact on your credit reports. Defaulting on your personal loan for more than 90 days, becomes the matter of concern. It may have a serious damage to your CIBIL score.
If you take a considerable amount of time to repay your personal loan, you will start receiving harassment calls from the third-party agent.
What causes a loan to default?
Most of the people think that loan default occurs only when the borrower fails to repay their loans. Well, part of it is true, but there is another factor as well that can be the main reason for your loan default. The details are as follows:
Instability of finance-
Financial default is one of the common types of loan default experienced by many people, wherein the borrower fails to pay the interest or the principal of the loan.
Delay in salary receivable-
Delay in your salaries is the most common reason for loan defaults in India. Even if you’re working in a private or public sector, delays in salary are very common. So, a borrower is left with no other option but to pay back their loans.
Following the pandemic, this has become the most common thing among citizens. The number of job losses has increased, and in this case, people with no jobs, but still have loans to repay are the victims.
In business, everything is uncertain, nothing is predetermined, and most businesses rely on business loans for smooth operation. If any failure occurs during repayment of the loan, it will result in default.
It has been seen that fraud is the major reason why loan defaults take place in India. It might sound mundane, but some people take loans with the pre-planned intention of not repaying them. Though it is difficult to qualify for a loan, even without a document, they still manage to get it. This is often found with business loans, which are unsecured loans of high amounts. Therefore, borrowers don’t pledge collateral equivalent to their borrowed amount.
How do you avoid loan defaults?
Following are the ways to avoid loan defaults:
Know your payment dates-
It is important for everyone to understand that EMI payments should be made on the specified date. When you receive notifications about the payment on your mobile device, it becomes easier. However, knowing your dates is important to ensure that your account has enough funds. This will help to keep you updated with your outflow.
Keep a sufficient balance-
Your account should maintain a sufficient balance to ensure that you don’t take the risk of defaulting on your loan. If you fail to pay it within the given period of time, you are at risk of default.
Talk to your lender-
If you think you are most likely to miss your EMI for the coming month, it is advisable to have a word with your lender or banks based on loan defaulting. It is better to converse than to sit and imagine how it will affect you.
Rescheduling of your debt-
If you feel the amount of monthly payments are stressing you out, you can contact a debt advisor and negotiate a rescheduled repayment period.
Refinance your loan-
This is the most convenient way to repay your missed debts. If you have fallen behind on your payments, you can easily opt for this method by getting a loan from another lender and paying off the previous loan. The only difficulty will be in the future when you will need financial support to repay your upcoming loan.
What to do if you’re in loan default?
If you are struggling with repayment of debts, the last thing that will hit the course is to stop paying them. This can lead to recovery agent harassment and severely affect your credit score. If you feel you are not in a position to repay your EMI’s, a debt solution is always available. A debt solution program with us will give you an affordable Debt Management plan so you can repay your debts and live stress-free. Contact SingleDebt on +91 961 910 3594 or fill out the form either on the Home Page / Contact Us