What to do when you are unable to pay personal loan

769 votes

I don't know whether any mortgage has been created against the said loan..any processing under SARFIASI Act 2002 has been started by bank.if bank has initiated a processing under SARFIASI Act and notice under section 13(4) has been issued..you may approach before DRT under section 17 of SARFIASI Act2002

Advocate Debasis Mitra LawRato

896 votes

If you have already desired for a one-time settlement and you need to get in touch with your bank and express your inability to make payments due to loss of employment. Yours is a genuine case and I am sure the bank will consider to waive off some amount. Start low by offering to pay 30 percent or less of what you owe and negotiate your way to an amount that you and the collector can both agree upon. But this is just an opinion and subject to differ from case to case basis. It all depends how well you have negotiated and made out a genuine case for such waivers. Remember at this stage, the bank has already classified your loan as non-performing asset (NPA) and going for a one-time settlement would definitely hurt your credit report that you could not repay your loan fully and therefore your credit score will be adversely affected.

I suggest you get in touch with your bank and consider some other options which will not affect your CIBIL report:-

1. Make a written representation to your bank expressing your inability to temporarily make payments as you have lost your employment and seek an EMI holiday for a few months. Banks always accepts genuine reasons and grant more time to defaulting customers to pay the remaining EMIs but may impose penalties for the deferment.

2. You can also approach the bank and request them to restructure your loan which may be increasing your loan tenure, reduction of charges, lowering of interest rate, etc. Supposing you opt for increasing your loan tenure, this would reduce your monthly EMI amount though you may end up paying a higher amount in interest. 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. Once your financial situation is sturdier, you should increase the EMI amount again.

After closing a loan it is important to obtain a No Dues Certificate (NDC) or Closure Letter from your bank while closing loans stating that the loan stands closed and then report it as "closed" on your CIBIL Report.

Banks do not prefer to file a recovery suit for personal loan matters for its lengthy process of laws but again it depends from case-to-case, the loan amount to be recovered and the bank itself. Bank has the right to realize the outstanding dues with due process of law. Such proceeding is initiated under Sarfaesi wherein a 60 days-notice is sent from the bank to the borrower for repayment within the notified period. To know more about it you can get in touch with me or any other legal practitioner expertise in such dealings.

Remember that repaying the bank to the full extent of your dues is not only your legal responsibility but also a moral obligation. You can seek ways of easing the situation temporarily but ensure that you finally clear all dues and not let your creditworthiness be harmed.

If your financial situation is really bad, then you may need to file for bankruptcy to free yourself from the loan commitment.

You also mentioned that get calls from the recovery team several times a day. I guess you are not getting any threat calls and/or abuses from the recovery team. Remember being a defaulter does not strip you of your legal rights or makes you a criminal. Its worth to record every phone calls you receive from the collection team, and always ask the name of the caller, his/her designation, name of the bank and the purpose. At any point of time, if you feel harassed or threatened, you should immediately make a written complaint to the bank’s ombudsman and send a copy to the chairman of the concerned bank. Lodge a complaint to your local police for harassment and send a copy to the SP or CP. Initiate criminal proceeding against the representative of the bank in the Judicial Magistrate Court.

Disclaimer: Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company.

Advocate Robert D Rozario LawRato