Home Loan default-What are your options before bank takes your house?
Owning a home is one of the basic necessities of life. Home loans are designed to make this necessity happen. Once you get the loan you have to start paying monthly EMIs until you complete the tenure of the loan. The process will go fine if you pay the EMIs on time, but in case of a medical emergency or losing the job, you may find it difficult to pay the amount on time.
When bank sends the notice of default?
The bank will not consider you as a loan defaulter if you fail to pay only one or two EMIs. If you repeat the same for three consecutive installments, the bank will send due reminders and if you fail to respond you will get the legal notice and will be considered as a loan defaulter. Recovering your property is the last option from the bank. If you fail to respond the legal notice, the bank will wait for three to five months and then the bank will declare your property as Non-performing Asset (NPA). Once you are considered as a loan defaulter, the bank will start the procedure for taking over your house.
Negotiating with the lender
Recovering your property is the last option from the bank. Before that you will get a chance to negotiate with the lender. The bank or the financial institution will offer a number of feasible solutions acceptable for both the parties. The bank may help you by restructuring the loan; the tenure may be increased even up to one year. Foreclosure of the loan also is permitted by selling the property with the borrower’s permission.
What are the options to safeguard your property?
The following are a few possible solutions to avoid the recovery of your assets.
Discuss with your bank: The bank must understand that you are willing to settle the loan. If you do not respond, you may lose your assets. Don’t wait for the final moment to talk with the bank. Discuss with the bank to find out a convenient solution for both the lender and the borrower.
Rescheduling or restructuring the loan: If the bank finds that your reason for default is genuine, you will get some relief in your EMI based on the clear guidelines of the RBI. Your loan amount will be restructured and the tenure will be increased up to one year. Though there may be some increase in the interest rates, you will get a quick relief from the higher EMI rates.
Asking for a grace period: If your financial situation is so poor that you cannot continue with your high EMI payments, you can ask the bank for a grace period which will be a temporary relief for a few months. You will get a few months to resume EMI payments with some penalty.
One time settlement: One time settlement is a better method to get rid of the loan than any other ways. If you have some amount to settle the loan, the bank will help you by waiving off some charges. If you face the worst financial situation, you can file for bankruptcy and make you free from the loan payments.
Conversion of loan: If your loan is unsecured make it secure by offering a security. Unsecured loans are stricter and are with higher EMI and interest rates than secured loans.
Repossession of the Assets
If the above options are not working, the bank will move on to the repossession of your assets as part of the recovery procedure. You will get a 60 days prior notice to settle the loan account. If you are not willing to pay, you will be given a demand possession notice to handover the physical possession of the mortgaged property to the lender.
The physical possession of the property will be taken in a peaceful manner between 7.00 am and 6.00 pm. If the borrower is not ready to hand over the possession, the lender can register a complaint before the Chief Metropolitan Magistrate/ District Magistrate. The court will entrust an officer to take over the possession with local police assistance.
Voluntary surrender of immovable property
An inventory list of all the articles found in the mortgaged property will be prepared and signed by the authorized officer, customer and two independent witnesses. The customer also has to give a written declaration that his valuables have been retrieved by him.
After 30 days of the possession of the property, if the borrower is not yet willing for a settlement, the bank will forward auction procedures and intimate the borrower the auction date and time. The bank will hand over the possession of the property anytime to the borrower even after taking over the possession,but before auction, if the loan is settled.
