Taking out loans today is an extremely common practice today. And personal loans help us cover a variety of expenses we couldn’t otherwise afford. From buying a house to renovating your home, you can get a personal loan for all possible situations provided you meet the required eligibility criteria, submit the necessary documents and also know when. and how you will repay the loan. Personal loans are a great option for getting instant cash when your budget is tight, but they can be stressful if you don’t pay them back on time. Before taking out a personal loan, you must be sure that you will be able to repay it, otherwise it could lead to legal consequences, which could affect your repayment history, creating a problem the next time you want to take out a personal loan. .
There are often times when you are struggling to repay the loan, and you keep missing one payment after another and sooner than you realize you will get the defaulted personal loan title. It is therefore important to know how defaulting on personal loans can affect your credit score and financial health. This article will help you understand the consequences that could arise if you default on a personal loan.
Your credit score is affected
First, the moment you default a Personal loan payment, you should know that your credit rating is directly affected. He is so affected that you are likely to lose up to 110 points immediately. Since lenders regularly update your repayment history with the credit bureaus, it is of the utmost importance to build your credit score in the best possible way and maintain it. Credit bureaus, such as CIBIL, use this information to update your credit score. And once your credit score is low, it can be a hassle to rebuild it.
A legal action
When you fail to repay a loan, your lender may take legal action against you to recover the money. According to the rules, you are liable to legal action if you do not repay your loan within 18 days. Lenders can deposit you under section 138 of the Negotiable Instruments Act 1881. Also, if it turns out that you are not repaying your loan intentionally, the lender has the right to take criminal action against you under Sections 403 and 415 of Indian law. Penal Code, 1860.
Difficulty getting new loans
Now, that’s pretty obvious. If you could not repay your previous loans, the lender will be skeptical about granting a new loan. Also, if your loan repayment is over 180 days past due, lenders mark your credit status as “charged off” when they send it to the credit bureau. So obviously getting a new loan with this status can be very difficult due to the negative status.
Ways to erase your personal loan debt
In addition to knowing all the consequences of defaulting on the personal loan, you should also be aware of the ways to settle it. Here are some of the helpful ways to settle your personal loan debt:
- Work out a payment plan with the lender
- You can also consider taking out a debt consolidation loan
- Leverage the equity in your home
Although there are ways to clear your personal loan debt, it is advisable not to fall into this debt in the first place as it can seriously affect your financial health and you may have problems getting a loan later in life. the future when there is an urgent need for it. Therefore, before availing yourself of a personal loan, write down minute details such as the loan amount you are willing to take, the terms and repayment periods. Use the EMI Personal Loan Calculator; it will help you understand things. A die best loan apps you can consider getting a personal loan is PaySense.