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Managing The EMI Load

19 November, 2018

, finance

India has seen significant progress in the past few decades including positive spikes to the purchasing power of most strata of people. Moreover, there are so many financial institutions that are competing with each other to provide loans and other services to all age groups. Purchasing a home, a vehicle, or any home appliance, or even a holiday has become so much easier. Also, when there is the possibility of purchasing and paying later,  it may look like loans are an attractive option to enjoy luxuries in life.

However, there is always a chance of issues cropping up when you have taken a loan. Loans are a liability and paying the loan EMI is a huge risk that is always dangling on your head like a sword. There are many situations - like when someone loses a job or other means of income, or falls sick chronically or terminally, leading to substantial unexpected expenses, or any other such emergency expenses that can hinder the payment of the loan EMIs. So, what happens in such cases?

The Bank Procedure

Usually, banks provide leeway for non-payment of up to 3 EMIs, before they start following up vigorously with the borrower for the payment of the dues. Most banks follow this procedure, and a few may have one or two EMIs up or down in this case. However, one can be sure that banks will quickly start collection procedures. They are legally well within their right to follow up and request for the payment of the loan EMIs, as the loan repayment is due to them.

Most banks may proceed with legal action following this, if they feel that one is not genuine in paying back the loan, or is just taking them for a ride, etc. In other words, they may have to start considering the case as a non-performing one and will have to take necessary action, like taking over the property for which the loan has been availed like the home, vehicle, or any such. In personal loans, they may have other options like guarantors. So, it is evident that loans will have to be paid, come what may. Is there any way in which one can avoid the legal action if one is genuinely in trouble and unable to pay the loan EMIs as scheduled?

Option To Explore

The bottom line is that loans have to be paid back. However, in genuine cases, as soon as one knows that there is an issue with paying an EMI, it is best to inform the bank in person beforehand. One may have to visit the bank, meet the concerned officials and explain the situation, give a written undertaking with proof about the same, and a guaranteed date for continuing payments. Rather than running away or hiding, and forcing the bank to look into legal options, an honest approach, may well be appreciated and also considered by the bank officials, if found to be genuine.

However, before doing so, it is always better to explore all other options to keep paying the loan EMIs, by taking loans from family or friends, etc. In the worst case, the bank may be approached for consideration. If the situation is such that you feel you may not be able to pay the EMIs any time soon, then it is best to consider selling off the property/ vehicle/ item for which the loan was availed in the first place. The bank auction of the same may yield lesser than the market price, and hence, other options should be explored in consultation with the bank. If the property is mortgaged, then you may not have too much of choice, but you may discuss the same with the lawyers and understand what is involved.

Bottom Line

It is not an ideal or a desirable situation, of being unable to pay back a loan that is taken. However, if one does find oneself in such situations, it is best to take the bull by the horns, approach it honestly and try to find an amicable solution, which is possible. All is not lost, if the intentions are honorable and genuine, things can be worked out.

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