What happens when a borrower delays the loan repayment?

Each time a bank or a financial institution lends the money, it expects the money to be returned. This is the same policy amongst each and every bank and a lender. However, in most cases when a person does not repay the loan amount even after the due date, every bank adopts necessary measures in order to recover the money. In such cases, where a person does not pay his loan overdue, the bank has the total authority to file a suit with the debt recovery tribunal and possess the security if needed.

The default cases of loan repayment are handled by agencies which are entrusted by the banks to complete the task. Loan recovery is similar to a task where the agencies have a target and incentives involved.

What should a borrower do in order to pay the loan before the due date?

• When a borrower borrows the money he/she is provided with the opportunity to approach the bank in case of any difficulty while paying the installments and also choose an option for the restructuring of their debt for a smoother repayment process.

• When a borrower fails to repay the loan within the due date, there are preliminary notices sent to the borrower which mention about the over dues with interests and penal interests. In case the bank realises that the customer has reasons to delay the repayment, the bank can proceed with the legal formalities and also approach the guarantor. The guarantor is supposed to pay the loan in the absence of the defaulter.

• Even if a single repayment is broken, the bank will follow up with the customer. Further follow ups will be dependable on the customer’s approach towards the issues and his circumstances. This will be followed by legal procedures if there is no response initially by the customer. In case if there are inevitable incidents like deaths or accidents, the bank gives sufficient time for his/her family member to repay the amount.

The Reserve Bank of India policy:

• The RBI demands norms wherein the banks give sufficient time to the customer to pay back and also that the bank does not use muscle power to recover their loans. There is a set of rules which the bank has to follow in order to recover their loan.
• In order to pursue few formalities like the collection efforts, lawsuits and hearings, the lender might need a legal representation and in case the borrower feels that he is at no fault, he should approach the lawyer with complete details.
  • In case of a home loan repayment delay, the lender has rights to seize the property legally and liquidate it in order to recover the debt. In many cases, wherein there is a fluctuation in the property prices, the legal action might take few years and there will be a delay in the liquidation of the property.

Henceforth as mentioned earlier a bank has a set of guidelines to follow in order to recover the debt and the consumer has every right to raise his/her voice if they are not informed earlier.

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