A loan is a financial aid provided by the banks to help the people to address their financial emergencies or to fill the financial vacuum created between your current financial position and your dreams. There are many types of loans available in the market to address different needs like home renovation, personal loan, car loan, business loan and much more. Irrespective of the type of the loan you take from the lender, you should be prompt in repayment of the loan which otherwise will affect your credit score and makes it difficult for you to get any other loans further. Though everybody is good at their intentions, uncertainties in life crop when you expect them at the least and makes it difficult to repay a loan. The current article is to guide you about the steps that should be taken to avoid defaulting the loan even during the time’s uncertainties.
Steps to Avoid Loan Defaulting
When you are unable to repay the loan, there might be some strong reasons behind the same. You may have lost your job or there might be some unexpected expenses in life. Irrespective of any reasons if you are unable to repay the loan on time, your credit score will be impacted and you may end up in losing the possession of the purchased asset if it is a car loan or home loan. Instead, you can follow any of these options to keep away from defaulting the loan.
Defer your payment
You can request your lender to defer the payment which lets you stop the payments of EMI for few months. Change of job or loss in the current business may be the reasons behind the same. You can explain these guanine reasons to the lender for differing your payment. Though the lender accepts your request, they may levy penalty for the same.
Reduce your EMI
High EMIs that tighten your budget may be one of the reasons for defaulting the payments. In such cases, you can request your lender to increase your EMI which in turn reduces your monthly EMI and you can comfortably repay the loan.
If you are unable to handle the terms of the loan, you may approach the lender to restructure the loan changing rate of interest, fee and other related terms. You can also consider reducing or increasing the tenure of the loan according to your financial condition.
One time settlement
This option should be considered by the borrower only when he could not make the payment of the loan anymore. The lender might classify it as a non-performing asset at this stage as the borrower is bankrupt and not in a position to repay the loan. You can choose to repay the loan with a one-time settlement. Though the bank allows you to settle the loan amount by paying less, your credit score will be affected.