Today we will discuss in detail regarding who is a defaulter in a personal loan! But before we could do so, let us understand the working of a personal loan. 

What’s a personal loan?

A personal loan, as the name suggests is a loan that is given for people to solve their expenses/problems. Also called a multi-purpose loan, you can get this unsecured loan from major banks and NBFCs in India without keeping any collateral.

What is the requirement for a personal loan?

• There is personal loan eligibility that is set by each Bank/NBFC. As a salaried employee or a self-employed professional, you must ensure that you fulfill each criterion so that you can get the best deals on personal loan interest rates.
• If you opt for a personal loan on a specific interest rate and in some time, a new Bank/NBFC is offering lower rates than your bank, then you can opt for a personal loan balance transfer and switch the outstanding loan amount with the new Bank!

Who is a defaulter in a personal loan?

A defaulter is an individual,

• Who has missed out on paying one or more EMIs deliberately?
• Who has absconded from his current location and has not paid his dues.
• Who has no money/bankrupt and cannot repay any amount.

What happens when someone defaults on a personal loan?

The Bank will look to sort this issue and try to recover as much money as it can before classifying this as a bad debt. 

• The Bank might take the help of a third-party debt collector to collect the debt from you. You might receive calls, emails, visit on your doorstep for the third party to collect the pending loan amount.
• If you had taken the loan and kept any asset like a vehicle/property as collateral, then the Bank has all the rights to seize your property.

What must be the ideal thing you should do in such a situation?

Just contact your lender!

Yes, we know it sounds funny but there’s nothing better than doing so. When you contact your lender and discuss the whole scenario, they will look for a solution so you can clear off as much debt as possible. 

The Banks might give you a discount up to a certain month where you don’t need to repay EMIs. They can also reduce the interest rates and increase the loan tenure so you can pay a lower EMI amount.

We hope through this blog post, you have understood the concept of defaulting on a personal loan.