How to respond to notice sent by bank regarding personal loan

111 votes

If you are unable to pay the EMI for a personal loan, there are several legal remedies available to you under Indian law. These remedies include:

1. Negotiating a repayment plan: You may be able to negotiate a repayment plan with the bank or financial institution. This may involve a temporary reduction in the EMI or a temporary suspension of payments until you are able to get back on track with your payments.

2. Seeking a loan restructuring: You may be able to seek a loan restructuring from the bank, which may involve a change in the repayment period or a change in the interest rate.

3. Filing for bankruptcy: If your financial situation is dire, you may be able to file for bankruptcy under the provisions of the Insolvency and Bankruptcy Code, 2016. This may allow you to discharge your debts and start fresh.

4. Filing a suit for debt recovery: If the bank or financial institution initiates legal action against you for non-payment of EMI, you can file a suit for debt recovery in the Debt Recovery Tribunal (DRT).

5. Filing a consumer complaint: You may also file a consumer complaint with the appropriate consumer forum if you feel that the bank or financial institution has violated your consumer rights.

It's important to note that ignoring the notice or failing to respond can result in legal action being taken against you, which may include seizure of assets or legal proceedings. Therefore, it's important to respond to the notice in a timely manner and take appropriate steps to resolve the issue.
The legal remedies stated above may have different implications and requirements, and seeking legal advice from a lawyer specialized in debt recovery matters can help you choose the best course of action based on your individual circumstances.

LawRato LawRato

824 votes

Hello,

Here are what your options will likely be:

Refinancing your loan

If your problem is one where the EMI is too high, due to either an increase in overall interest rates, or an increase in your personal commitments to yourself, your loved ones, or any other matter personal to you that reduces your bank balance, or a combination of these factors and others, then what the bank will do is restructure your loan.

If you are currently paying Rs. 10,000 per month for N years, and this is too high, the bank might offer you an EMI less than Rs. 10,000 per month, for a little more than N years. So your EMI goes down, giving you some breathing room and the bank doesn't lose money because it will simply make it up from you over a longer period of time. Everybody wins on some level.

Keep in mind that the payments you now make will eventually cost you more in terms of total money repaid, but if breathing room is what you need, this will provide it. However the extension in tenure will be small, so the change in your EMIs will also be small. Also, as a next step, the bank can opt for foreclosure by selling off the collaterals stated when you applied for the loan, by auction, with your co-operation.

Refinancing can be done for many situations.
It is also the go-to option for people who find that their bank is not reducing floating interest rates in line with other banks. You can approach your bank to reduce rates, or you will shift to a more amenable lender. For credit card debt, you can also opt for balance transfer by shifting your existing debt onto a new card with a 0% interest rate for 6 months, and paying off as much as you can within these 6 months.

Deferring Your Payments

May be the problem is not that you can't pay enough, it is that you can't pay at all. If you are in a position where you feel that within a few months your financial situation will change, you will get a job and be able to start repaying your loan a little bit at a time, perhaps at a lower EMI, then you can approach your bank for deferral of your payments. The bank will grant relief, giving you a window of opportunity to calmly seek ways to increase your cash flows.

Once the window closes, your EMIs will restart (on either the same terms or your new negotiated terms), but will include late payment penalties, known as Delayed Payment Charges. These charges are applicable for payments made after their due date. In case some of your post dated cheques (PDCs) have bounced due to insufficient funds, you will also be subject to cheque bounce charges.

Lump Sum Settlements

This is something that for obvious reasons might not be feasible for a home loan, but it can work for a personal loan, credit card debt, or a car loan. On a case to case basis, banks are sometimes willing to go for one time or lump sum settlements of outstanding dues. They will waive some of the charges or some of the amount and charges, and you can pay the rest as a loan settlement. However, this is murder on your credit score. Getting a loan in the future, if you want one, will become either very difficult or very expensive, or both.

What happens if you still can't pay?

At this stage, your bank will seek repossession of the asset. The asset will be auctioned off within 15 days (for a movable asset like a car) or 30 days (for an immovable asset such as a home). During this period, you still have the option of buying back your own property provided the funds are available to you.

At no time during the process will the bank not give you the option to pay, in bits and pieces or via a reduced lump sum, and maintain possession of your asset.


Regards

Advocate Anilesh Tewari LawRato

761 votes

There is no clause in the loan agreement that permits you to halt payment of installments in case of financial hardship. You may either pray that bank does not take any coercive measure (or Contest the matter in case bank moves before the court; courts usually have a relief giving approach) or alternatively take another loan from another bank and close the instant loan, increasing the tenure and reducing the installment amount.

Advocate Arjun Krishna LawRato

263 votes

When you receive a legal notice from a bank regarding a personal loan, it's essential to handle the situation carefully. Here's how you can respond effectively:

• Review the Notice: Carefully read and understand the contents of the notice. It will typically outline the reason for the notice, outstanding dues, and the action the bank intends to take.
• Contact the Bank: Reach out to the bank promptly. You can either call the customer service or visit the nearest branch to discuss the issue. Communication can often lead to an amicable resolution.
• Seek Legal Advice: If you find the notice unjust or have difficulty resolving the matter with the bank, consult with a legal expert. They can provide guidance on your rights and the best course of action.
• Negotiate a Settlement: It's possible to negotiate a settlement with the bank, which may involve restructuring the loan or agreeing on a repayment plan.
• Document Everything: Keep records of all communications with the bank, including emails, letters, and phone call details. These records can be valuable if the matter escalates.
• Attend Legal Proceedings: If the issue remains unresolved, attend any legal proceedings as required. Ignoring legal proceedings can lead to adverse consequences.
• Comply with Court Orders: If a court issues an order related to the loan, it's crucial to comply with it promptly to avoid further legal complications.

Remember that each case may have unique circumstances, so it's advisable to consult with a legal professional for personalized advice.

Advocate Chikirsha Mohanty LawRato