Stay away from loan defaults!

Oct 20 2013, 13:23 IST
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Inflation has resulted in rising NPAs and people are defaulting on their borrowings. Reuters Inflation has resulted in rising NPAs and people are defaulting on their borrowings. Reuters
SummaryMoreover, currently the savings is getting squeezed due to ever rising inflation.

default. However, this is only possible had you been regular in your earlier debt payments.

Keep one advance EMI in Hand:

Keep one more EMI fund with you so that in case of any emergency you will have those funds to repay the amount. For example: If you had taken a home loan whose monthly installment was Rs 20000, try and keep an advance EMI in hand. This will mean you will have to keep Rs 40000 only for the purpose of your loan. Expenses should be curtailed once your account reaches Rs 40000. If that is not possible make a limit as per your convenience like Rs 35000. Even this will help you a lot at the due date.

Avoid Foreclosure Situation:

If the loan sum is small, try and finish it as early as possible. There are no prepayment penalties, but yes defaults are slapped with exorbitant penalties. If it is the property which you purchased for investment purposes, you can sell the same and avoid any foreclosure. Foreclosed property will come in the possession of the bank. Therefore, it is sensible to sell it and get the benefit of price appreciation. Immovable properties at good locations can be easily sold out.

Extend Loan Tenure and Decrease Loan Amount:

It totally depends on the understanding between the borrower and the lender. A person can reschedule his debt, if he finds that the current structure is troubling him. This is also known as debt rescheduling. Under such streamlining, the loan tenure is increased while loan value is decreased. This provides cushion to the person and avoids non-payment.

Switch Loan:

Interest rates play an important part in the payment condition. It is quite possible that the loan taken by you is at higher rate compared to the loan of some other banks. From a minor sum of money you can switch the loan with other bank and can get easing terms. New customers are always attracted to easy offers, so it is better to properly analyze the offer before opting for loan switch.

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