Loan Default: These rights will save those who do not repay the loan from trouble...
Anyone may need to take a loan. Be it a home loan or a personal loan, once you take a loan, you have to pay the EMI till the end of the tenure. If you fail to pay the monthly installment of the loan i.e. EMI, its immediate consequence is seen in the form of a penalty. However, its far-reaching consequences are also visible.
According to Manavjeet Singh, MD & CEO, CLXNS (Collections), if you feel that you may not be able to repay the loan amount on time, then you can take some preparation steps in the beginning. For example, you can increase the loan tenure, which reduces the EMI. Similarly, organizing your financial situation and restructuring the loan before finalizing the loan terms can also be of great help. You can also request temporary relief due to a financial emergency, but you may have to pay a penalty.
Singh says that if you have not been able to take such measures or have not been able to repay the loan despite whatever you could have done, then you should be aware of your rights as a loan defaulter. According to the law, the financial institution takes steps to recover the borrowed amount. However, lenders and banks have to follow norms while doing so. Loan takers also have some rights which are important to know.
Your right to be heard
As a loan defaulter, you have the right to express your views or be heard. You can write to the loan officer explaining the reasons for failure to repay the loan, especially if it is due to job loss or medical emergency. Nevertheless, if you are not able to repay the loan amount and have received an official notice from the bank, it is your right to make a representation to the authorities with any objections to the repudiation notice.
Right to contract terms
According to Singh, the bank or any third-party recovery agent cannot harass or force the borrower to repay the loan amount at any time of the day. As per RBI guidelines, banks will have to follow a code of conduct while outsourcing recovery work and appoint trained agents to handle customers with utmost sensitivity. They should be aware of the calling hours and confidentiality of customer information. The time and place of recovery can be decided in advance, for example between 7 am and 7 pm.
Right to be treated like a civilized citizen
Singh says it is your right to be treated civilly. You can use legal recourse if the bank/lender representatives shout or use physical violence or threats. The bank/lender will also have to share the details of the recovery agent with you. While going to the agent, your privacy should be respected and you should behave in a civilized manner.
Right to fair price
If you have been unable to repay your dues and the bank has initiated the process of auctioning your property to recover the payment, you should have received a notice from the bank informing you of the same. It should also mention the fair value for the property/assets, details of the time and date of the auction, reserve price, etc. Your rights as a loan defaulter give you the right to object if the property has been undervalued.
Right to balance income
If there is any excess amount from the money recovered after the sale of the property, it will have to be returned to the lending institutions. Since the value of the property or asset can increase at any time, its value may be more than the amount you had to pay to the bank. Therefore, it is important to monitor the auction process.
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