There are situations in life when you require aid to meet urgent financial needs. In such circumstances, opting for a personal loan online can be ideal. With repayment flexibility and attractive personal loan interest rates, the decision to apply for personal loan comes instantly to individuals in dire need of quick finance.
However, taking a personal loan also comes with the worry of not being able to repay the loan on time. You might find yourself in unfortunate situations like bankruptcy, joblessness, etc. that consumed your savings, which may lead to your inability to repay the personal loan on time.
Consequences of Not Repaying Your Personal Loan
A personal loan typically is an unsecured loan, meaning that a borrower does not need to provide any guarantee to the lending institution. This is why personal loan interest rates are generally higher as compared to secured loans.
If you fail to repay your personal loan, then it directly affects your CIBIL score. A bad repayment record also diminishes your chances of getting future loans sanctioned as any lender will doubt your creditworthiness and refrain from providing you financial aid.
Failing to timely repay your personal loan also attracts default interest. This, combined with the late payment charges, can eventually snowball into a massive debt burden. Moreover, if you fail to repay the loan, the lender has the right to file a court case against you to recover the money.
Steps to Take If You Are Unable to Repay Your Personal Loan
Talk to your lender
If you have a legitimate and compelling reason for being unable to pay the EMIs on your personal loan, talk to your financial lender to work around the problem. It’s not smart to ignore calls or messages from your lender, instead inform them about your situation. You can also ask for an EMI holiday for one or two months. If your reasons are genuine, your lender may accept your request, but they may impose penalties for the delay of payment.
Decrease EMI
If you are struggling with the EMIs, meet your lender and request them to increase the loan tenure. By doing so, you will reduce the monthly EMI amount. However, this will increase your overall interest payable. Once your financial condition gets better, you can increase the EMI amount again.
One-time settlement
You can also opt for a loan settlement if the interest accrued on the personal loan is more than the principal amount. If due to your financial circumstances, you cannot make any further payments, then you may get the option to settle your personal loan through a smaller payment. However, remember that if you use this option, your credit report will reflect that you couldn’t pay your loan entirely, and your credit score will be affected.
Final Thoughts
A personal loan is an excellent way to cover your immediate financial requirements, but you should always avail an amount that you can afford to repay.
Tata Capital offers personal loan for self-employed as well as salaried individuals at competitive interest rates and flexible EMI options. Use the personal loan EMI calculator on our website to accurately deduce your EMI and plan your monthly finances better.
To get an instant personal loan, check your personal loan eligibility, compile documentation correctly, and apply for a personal loan online.