Unlike in the past, getting a home loan, auto loan, or personal loan has become easy these days, especially for working salaried professionals with a good credit score. Not just large public and private sector banks, even small finance companies target such customers with easy home, auto or personal loan offers. Banks also provide short-term quick online loans as well as free credit cards. However, here is a warning! While getting money on loan is very easy, paying it back on time often becomes very difficult for loan takers. The reason may be illness, loss of job or even some family tragedy or dispute and such like. 

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Loan takers should know that banks, NBFCs and others lenders do not show any leniency to those who miss loan EMI payment. Such customers face at least three massive troubles that may turn their life upside down.  

1. Harassment and even abuse

When a customer defaults on loan repayment a bank hires a third party to extract money from the customers. Although the bank says that the third party should adhere to the Indian Banks Association’s (IBA) code of conduct on debt collection, it doesn't always happen this way. 

The third parties often resort to harassment techniques to extract money from the loan takers who have missed paying their EMIs. The harassment becomes worse when the customer is going through a bad time. Even today a report in Times of India, says that two officials of a private finance company have been booked for allegedly intimidating a couple in Greater Noida. The couple were allegedly harassed after they failed to pay an EMI for a loan they had taken! 

2. Credit score disaster

Not paying a loan EMI on time hits customers' credit score. This limits their eligibility for availing easy credit in future. Scheduled commercial banks and credit companies have very strict rules against delay or default in loan repayment. If you miss a credit card due date or home loan EMI beyond the prescribed date, your credit score may come down by 50-100 points. The effect will be bigger in case of big repayments.   

3. Breathtaking Penalty

Banks charge a penalty for missing credit card due date or loan EMI date. Take for example the penalty on missing SBI personal loan EMI date: The bank says in its 'Terms & Conditions' for Personal loans: For loans above Rs 25000, if the irregularity exceeds EMI or installment amount, for a period of one month, then penal interest would be charged @2% p.a.(over and above the applicable interest rate) on the overdue amount for the period of default. If part installment or part EMI remains overdue, then penal interest is not levied.

In case of  default, or when the amount due is not paid by due date, the SBI sends reminders from time to time to customers for payment of any outstanding on his loan account, by post, fax, telephone, email, SMS messaging and/or through third parties appointed for collection purpose to remind, followup and collect dues.