What To Do If You Cannot Pay Back Your Debt
There are two parts to this.
- Unable to pay the EMI on the loan you have taken
- Unable to pay the entire loan itself
Why is this difference important?
Listed below is advice for both these scenarios/ situations.
Unable to pay the EMI on the loan you have taken
Non-payment on an EMI will lead to your credit score getting affected. Infact, even one missed payment in the preceding 6 months can lower your credit rating and make it more difficult to get new loans or funds.
Missing two more more could even get the bank to repossess the assets that were purchased with the loan.
This hub is not about the technical process of car repossession, but more on what you can do to avoid it (if you do want to avoid it :) )
Here are some suggestions:
- Talk to your bank - if you know that you will fall behind on your EMI payments, it is better to inform your bank in advance. By information it does not mean drop and email saying 'yo, no dough, you no getting money this month'. NO. That is not what I mean. Tell your bank means, talk to them. Contact your loan officer and discuss the options. The bank may allow you to make a reduced payment or may extend the term of your loan.
- If your own bank does not respond or assist, go to another bank - Most banks welcome clients from other banks. Its about winning customers. It is not uncommon to see a new bank take over the entire loan of the previous bank. What happens is that the bank will negotiate a new agreement with you - they make money on the processing fee, gain a customer and more interest income - and will pay the entire amount for the old loan. Be open with the new bank, telling them your changed financial position.
- Try and convert personal loans or short-term loans to asset based or long term loans - Personal loans and credit card outstandings are the most expensive loans. If you cannot pay these try converting them to long term loans or you may want to pledge your assets towards this loan.
Unable to pay the entire loan itself
This is serious.
If the loan is large and assest backed the bank will discuss options with you. LIke reduced monthly payments, longer term solution, even top up loans.
Personal loans can become tricky since the bank does not have any collateral. The best advice would be to try and convert a personal loan to an asset based loan, but if that is not possible you should take legal advice on how to proceed further.
Shutting off your phone or changing your number will not help for long.
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