In today's time, the loan is a good option to meet the need for money for different purposes. People keep taking loans for different purposes. This includes home loans, education loans as well as personal loans. Many people also take personal loans for personal purposes. If someone has taken a personal loan from a bank or financial institution and for some reason is unable to repay it, what can happen next? Now, when any financial problem suddenly arises, there is a problem in repaying the loan. Due to many reasons, the loan taker may be unable to repay it. Let us know.

What is a personal loan?

First of all, it is very important to know what is personal loan. A personal loan is that which a person takes a loan from the bank for any personal purpose like buying an expensive thing or any other work. There are two types of personal loans, secured personal loans and unsecured personal loans.

Unsecured Loan: An unsecured personal loan is one where the bank gives the loan based on your financial eligibility. For this, the bank demands your salary, loan already taken, income certificate, CIBIL score bank statement, etc. In simple language, the bank gives you a loan without pledging anything, it is called an unsecured loan.

Secured Loan: Talking about secured loans, for this the bank asks for something or property from you as a guarantee. This means that the bank pledges some of your property or goods in exchange for your loan amount. This real estate can be anything. In this, the bank does not have to take much risk, because if the applicant does not repay the loan, then the bank recovers the loan amount by selling the mortgaged property. You get a secured personal loan only based on the value of the mortgaged property, but you have to pay less interest as compared to an unsecured personal loan.

What will happen if you do not repay a secured personal loan?

When a bank gives a personal loan to someone, it makes a legal agreement under the Indian Contract Act 1872 that you will repay the loan amount on time. If you do not make regular payments of installment or EMI, your loan becomes irregular. In such a situation, the bank has the right to take recourse to the law to recover its money. First, the bank will contact you personally and ask you to repay the loan. Failure to do so will send a notice and warn of legal action.

Even after this, if the loan taker does not give any response, then the bank will file a claim in court, the expenses of which will have to be borne by the loan taker. The bank will present in the court the check that you gave to it while taking the loan. Separate legal action will be taken against checks returned unpaid under Section 138 of the Negotiable Instruments Act. There is also a provision for jail and fine punishment under this section. Lastly, if you do not repay both, the bank will recover its money by auctioning the immovable property mortgaged by you.

What will happen if you do not repay an unsecured personal loan?

Most of the problems arise in unsecured personal loans. In this, the bank does not have any of your assets for recovery. In such a situation, the bank makes different efforts to recover the loan amount. The bank incurs higher losses in unsecured personal loans. The bank will take action against you if you do not repay the loan amount, but the bank also has some limitations. The bank can take action only as per the guidelines issued by RBI. If you have taken a personal loan and are unable to repay it, then you do not need to worry too much. There are rules for this. Provided, you must have a valid reason for not being able to repay the loan.

In case of non-payment of loan installment, the bank will first contact the loan borrower directly and talk about settling it. After this, an official notice will be issued by the bank. If you do not repay the loan even after the bank's call, the bank sends your loan amount to the loan recovery agency for payment or settlement. After this, this agency will call you or send a recovery agent to your home for loan recovery. If even after this you are unable to repay the loan, your loan amount is stopped. The biggest loss due to this falls on your CIBIL score. In simple language, your CIBIL score will get spoiled and then you will not be eligible to take a loan in the future.

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