Loans are the best way to meet the demand for finances. But, with it comes the repayment and EMIs which needs to be done on time. Every loan has its defined repayment period and EMIs which the borrower needs to pay every month. This not only reflects his creditworthiness but at the same time impacts their credit score and credit report. There might arise a situation because of which you could not be able to pay the personal loan or the payment might get delayed. Under such circumstances, it may lead to a penalty and also affect your credit score.
Here is what happens when you can’t pay back your personal loan:
The first thing you should remember if you have taken a Best personal loan is that it is an unsecured loan, and your credit score will get adversely affected if you miss the payment or there is a delay in the same.
- Penalty – The bank may charge you with penalty fees or late payment fees. Well, this varies from one bank to another. If you have been regular in paying the EMIs previously, the bank might just consider your case and waive off the penalty charges. But, it is advisable that you should talk to the bank and explain to them the reason for late payment of personal loan or why have you missed the payment.
- Adverse effects on the credit report and credit score – Irrespective of the type of loan you have applied for, it is important that you must repay it on time. Delay in payment or missing the payment may affect your credit ratings and credit reports. Banks and financial institutions sent all credit related information to CIBIl and other credit related agencies.
Banks and financial institutions have defined credit score range that every borrower must match so as to get the loan approved. In case of delayed payment or series of non-payments, the bank will put you in the list of defaulters and will affect your credit rating. It will further reduce the probability of getting the personal loan approved in future.
- Wages garnishment – There is a greater probability that non-payment of the personal loan amount will make the lender take you to the court. Here the court will give the decision in favour of the lender and will ask you pay the personal loan amount from your living expenses. It continues till the time loan amount is repaid.
- Higher interest rate in the future – Well, if you have delayed the payment or have not paid your EMIs, it not only affects your credit score but at the same time if you apply for the loan in future, then the bank or other financial institutions might approve your loan but at a higher interest rate. So, if you want to save yourself from the brunt of high-interest rate, it is advisable that you should pay the loan on time.
- Seizure of Assets – The worst thing that happens when one fails to repay the loan is that the lender legally takes away your assets. They first keep on calling you for repayment and in case you have taken a secured personal loan then they might just seize your asset which you have kept as collateral.
To save yourself from all the hassles and problems that arise after non-payment of the personal loan, it is always wise to pay the loan on time. Calculate your monthly personal loan EMIs and expenses and plan your budget so that you are not in a financial crunch. Also, make sure that you set a reminder for loan payment so that you don’t miss the dates.
Note : If you have any quary about Sbi personal Loan you can directly contact afinoz team.