It is important to take special care of its repair in taking a loan on the property. Default on repair means that you will have to pay late fees, as well as other losses. Bank and NBFC have legal rights to deal with default cases. It is important to know about them properly.
Meaning of default
Default does not mean payment of loan EMI on time. Banks or NBFCs only put penalty at the initial one or two defaults. However, they use legal routes when they are default more often. First banks put that loan account in the category of non-performing assets (NPAs). Banks take this step if EMI is not paid for 90 or more days. After this, the path of recovery of his money is opened for them under the law.
Impact on credit score
The first effect of defaulting on repair is on the person’s credit score. Every default information is recorded in credit rating agencies like CIBIL or Experian. This reduces your credit score. A bad credit score means that you may have difficulty in getting a personal loan, car loan or credit card issue. If such a person gets a loan, then the bank or NBFC puts a lot of interest on it.
Banks have recovery rights
The loan given on the property comes in the category of secured loan. Banks and NBFCs have the rights to recover this loan under the law. They can issue a notice of recovery under the Sarfaesi Act. If the default does not settle within 60 days, then banks can claim their claim on property. You can recover your money by selling it. It is no longer difficult for banks to use the legal route.
More risk in taking loan at home
If a loan has been taken by mortgaging the house, then there may be more trouble on the default. The bank can ask the person to vacate the house. This creates great trouble for family members. It is very difficult to empty the house in which you have lived for years. The house is an asset that is not only a financial value but also an emotional value. For this reason, many people do not like to take a loan at the house in which they have lived.
Bank helps when the exact reason for default
Many times a person is forced to default for such reasons which are out of his control. In such cases, banks and NBFCs show interest in helping individuals. Most banks and NBFCs give the option of loan restructuring to individuals. In this, the duration of loan repair is extended or EMI is reduced. This makes it easier for the person to repay the loan. Banks do not put such loans in the category of NPAs.