Bad impact on credit score

If you do not pay your personal loan on time, the first impact is on your credit score. Your credit score gets spoiled, which can make it difficult to get a new loan in the future. You become an unreliable customer for banks and other financial institutions.

legal action might be taken

• In case of default in repaying the loan, the bank or financial institution can take legal action.
• Banks can go to the civil court and file a case against you and demand to seize your property or stop your salary.
• If the bank feels that you have committed fraud intentionally, a case can be registered under Section 420 of the Indian Penal Code. This also includes a jail sentence.

Dealing with recovery agencies

When banks are unable to recover your dues, they take the help of recovery agencies. These agencies try to recover money from you through phone calls and visits. Many times, the customer has to face mental stress and anxiety due to their behavior.

What do RBI rules say?

• The Reserve Bank of India has laid down some strict guidelines for recovery of personal loans:
• It is necessary for banks to give notice to the loan defaulter first.
• The customer must be treated with respect during recovery.
• Banks will have to take special care to avoid harassment by recovery agencies.

What to do if you are unable to repay the loan?

• If you are not able to repay the loan then talk to the bank.
• Negotiate repayment plan: You can ask the bank for new payment options or changes in EMIs.
• Settlement option: A lump sum payment can be arranged by talking to the bank.

The post Personal Loan Default: What action can the bank take against you for not repaying the personal loan, know everything first appeared on Rightsofemployees.com.