Defaulting Personal Loans and its Consequences

It turns into a difficult issue in the event that you are defaulting on a personal loan, as it hampers your financial reliability. It is always good to understand that the availability of personal loans is increasing day by day. Many companies and big firms are also expanding their market to enter this lucrative industry.

However, in the wake of all these financial and lending organisations, there are severe consequences if you default on your loan repayments. As you already know, personal loans are granted without any collateral, and thus, you need to be very reliable.

In this blog, we are going to deal with and showcase all the consequences if you default on your personal loans.

Consequences of Personal Loan Defaulting in India

There are several consequences if a person willingly or unwillingly defaults on the interest repayment on their personal loans. Several such damages that you can face if you default on a personal loan are as follows:

●      Damage to Credit Score

Mostly, personal loans for salariedindividualsare available online on many platforms and loan applications. These defaults can severely affect a person, as they are known to negatively impact the credit score. If you are missing payment dates on a regular basis, these are reported directly to credit bureaus in India. These agencies can update your reduced credit score as a mark of repayment-related non-confidence.

●      Unwanted Collection Efforts and Legal Action

If you are defaulting on your personal loan, the lender will immediately resort to recovery efforts for the unpaid amount. Such efforts might include phone calls, emails, and basically any means of communication you have provided. Persistent calls and emails might be difficult for you to process on a daily basis. However, in case of any discrepancy on your side to process the repayment, they might also take legal action against you. Legal action also means the expense of hiring lawyers and ultimately results in multiple expenses.

●      Increase in The Fees and Interest Rates

Defaulting on personal loans also means an increase in interest rates and the accumulation of penalty fees. The lender mentions the interest rate increase and penalty charges applicable before lending the money. The compounding action of the interest rate that you are already paying and the additional fees mean more financial burden.

●      Negatively Impacts Personal Relationships

While this is not directly related, a major percentage of the population taking loans faces stress and emotional issues. If you have borrowed from your family or friends, it might also damage or stain the relationships if you are unable to pay back timely. Money can be a very sensitive matter, and defaulting on it might cause multiple issues.

Thus, we can say that defaulting on personal loans has far-reaching effects and hampers your financial stability as well. It is always good to ensure that you are taking proactive steps to pay back the interests timely and then commit to other financial engagements.

Tips for Maintaining Your Debt Repayments on Time

Always try to follow a strategy to pay back the money within time. Some of the tips and tricks are as follows:

• Always try to make sure that you are paying back your personal loaninterests on time and never delay. Financial liability towards a lending organisation must be taken far more severely than others.
• It is always expected to make sure that you are keeping your credit utilisation for legitimate needs. Do not use this for any lavish or luxury spending.
• Avoid taking more money than you can pay back with interest.
• Do not cosign for personal loans if the person you are connected with does not have a sound financial mentality. It is better to not co-sign for loans with individuals who are extremely volatile in their spending.

Conclusion

While an instant personal loan is one of the easiest ways to get money and help your immediate financial needs, there are certain consequences as well. These consequences are only going to happen if you are not delivering your repayments in a timely manner. Always ensure that your loan amount must be within your ability to pay it back. Opt for a personal loan only if it is absolutely a need.