How to respond to notice sent by bank regarding personal loan

Hi Sir, I am not able to pay my last 3 month's emi of personal loan and credit card debt took from hdfc bank. However bank sent me legal notice through advocate due to some financial loss i would not be able to pay emi for 1 year more after that i would pay all the emi so please suggest how to deal with this situation. Please it is urgent Thanks in advance

Answers (2)

84 votes


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.


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310 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.

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