Loan default: Personal loan is quite easy. There is no mortgage for this. But, if you miss the installment of personal loan, then its effect can remain in your credit report for a long time. These reports make the country’s major credit bureau companies. Such as Transunion Cibil, Crif High Mark, Equifax and Experian. Credit bureau companies maintain a record of such pussy for the first time in their database for 7 years from the date of missing installment.
Applying for new personal loans, credit cards or home loans of this period, the previous default comes to the bank or financial institution. This is the risk of rejecting the loan application. Even if the loan is approved, the interest rate may be higher.
The direct impact of default on credit
The default mark on the credit report directly affects the credit score. You may pay the outstanding amount later, but the default record filed on the report remains its place. It affects long -term credit ratings.
According to experts, this can not only reject your loan, but can also put the customer in a position to give additional documents or safety guarantee for any credit facility in the future.
How to reduce the effect of loan default?
Financial experts recommend adopting financial discipline in this way. You should fill all the installments on time. If possible, you can also arrange to finish the loan ahead of time.
- Early payment of arrears: Always try to repay the loan before the default is created.
- Take no deuse certificate: After the complete payment is made, it is necessary to take a no de point certificate from the lender.
- Review Credit Report: Identify any disturbances in the credit report in time and file a complaint for improvement.
- Avoid excessive loan application: Applying for several loans in a short time increases ‘hard inquiry’, which causes further damage to the score.
- Use of secured credit product: Timely paying by taking FD-based credit card or small loan helps to create positive credit history.
What is the rule of RBI about this?
Banking Regulator RBI has instructed all banks, NBFCs and asset re-construction companies to ensure transparency and equality in the credit reporting process. Under this, reporting has been emphasized on prevention of incorrect information and protection of consumer rights.
Expert says that the record of default is of course in the report for 7 years, but if a borrower adopts regular and responsible financial behavior during this period, its effect may be less over time. Habits such as timely payment, balanced use of credit cards and limited loan application help improve the score.
Also read: Explainer: Home, Car, Gold, Personal … How many types of loans are there, what is the difference between them?