Bank loans today play a very crucial role in meeting your financial dreams. Such loans help you make the most of your exotic holidays and meet your financial worries like medical exigencies. Imagining a life without any loan is very tough now as it is tough to bear the expenses linked with the vehicle, home, education and even holidaying outside the country. You tend to enjoy all the important advantages simultaneously by effectively paying the loan EMI which is very small than the overall expenses involved. However, in the scenario of exigencies like medical issues or job loss, many witness difficulty in making payment of the EMI. The inability to make payment of the EMI timely will make you come across as a defaulter, as well as your score, goes for a toss.
In the case you witness such a scenario and are on the very verge of defaulting on any loan, do not panic because you can always negotiate with the lender to arrive at a solution. Here in this article, discussed here is what happens after you opt for a credit deal like a loan or credit card. While CIBIL score for credit card and loans are important to maintain when applying for them, this chapter does not end here. This means your chapter does not end once your SBI credit card CIBIL score is considered positive and basis of this you are provided with a credit card, in fact, it begins from here as your entire journey as a credit user is recorded based on which other banks take their decision to lend you.
What’s loan default?
In easy terms, default happens when any debtor fails at paying back the loan or hasn’t witnessed a scheduled EMI repayment either unwillingly or willingly. Discussed here is a case where the debtor is not in a dire position to make the payment because of the exigencies or job loss.
What are the important options available in this scenario?
You are on the verge of loan defaulting because of major reasons like higher EMI, medical exigency, job loss or business loss. You do not, intentionally, want to lose your credit rating or default. What must you do in such cases?
There are distinct options which you simply can explore. These include –
Enhancing the loan repayment tenure – In the case your EMI burden is very heavy, ensure to negotiate with the bank to enhance the loan repayment tenure. Enhancing your repayment tenure will lower the EMI and you would avoid defaulting on the loan.
Deferring the EMI payment – You simply can negotiate with financial institutions to defer the payment of EMI for a specific time period in the case of financial exigencies like job loss. Generally, financial institutions do not turn you down if you are a genuine customer, but you require paying some charges as deferment fees in such a condition.
Loan against fixed deposit or public provident fund – If the interest constituent burden is very high and you are figuring it out to be very tough to make the payment of EMI, then you can go for the loan against PPF or FD option as these options are available to you at a cheaper rate of interest. You can use such an amount to make the prepayment of a higher-interest credit option and continue making payments of the EMI on the loan against PPF or FD with lowered EMI burden. Ensure to be ready to make payment of the pre-closure fees in such a scenario.
For home loans – You can definitely ask your financial institution to enhance the home loan repayment tenure if your EMI burden is very high. Normally, the repayment tenure of a home loan may be enhanced by a year.
Unexpected expenditures might happen at any time, and you might be propelled to borrow funds to meet sudden unforeseen exigencies. Loans are usually the aptest means to mitigate your financial requirements. A home loan is the next kind of loan that you might opt for to own a home of your preference. Thus, loans, whether home or personal are provided against the payment of interest and principal constituent in the EMI (equated monthly instalment) form.
Additional Reading: CIBIL Score Check Free Online by Pan Number
There are at times when you may default on your EMI due to any medical exigency or any kind of external reason. Your inability to make the payment of the outstanding due on time tends to make you lose nearly 50 to 70 points on your score, which can impact you when you are looking to avail a new credit option in the future. When the future appears uncertain to you, it is important for you to know how you can avoid the default risk in EMI in case you witness any financial problems. A lender or bank endows distinct ways using which you can recover the money. In the case of a home loan, it is thoroughly secured for banks to own your property till the time you repay the loan proceeds. However, it is advisable to make payment of your loan EMI timely and avoid any default in EMI. Here are some of the crucial tips using which you can avoid EMI defaults.
Use exigency fund –
It is difficult to predict disaster strikes and for this, you must be prepared from before. For this, you must ensure to set aside 6 months of your monthly mandatory expenses to avoid defaulting your EMI. Also, you must ensure to keep aside a specific amount of funds that you can use to take care of your unexpected monthly expenses.
Raise funds via loan against investment option –
In case your emergency fund is exhausted, you must look out for other means to mitigate your expenditures as well as repay your loans. For this, it is recommended to take up a loan against assets or investments like fixed deposits, insurance policy or gold. Such loans can easily be used to make the repayment of home loan EMIs as they come at a lower interest constituent and can simply be repaid later.
