What happens when you don't repay loans
07-11-2017 Tue 12:45

What if you take a loan for constructing a house or buying a car and don't repay? Did you ever think about this? What will the bank do. Let us learn about the options before those who have taken loans and other details
To own a house is every layman's dream and aspiration. When compared to the past, these days, it is possible to realise such dreams with loans. When you are trying to own a house for the first time, you will need to shell out all your savings. Many are going in for loans, according to their capacity, and buying or constructing a house.
After struggling to own a house, what if you are unable to bear the burden of Easy Monthly Instalment (EMI)? Supposing you lose your job at this very point of time or you are taken seriously ill. Just imagine. Your financial condition will be upside down. You will not be in a position to repay the loan. It is necessary to know what to do in such circumstances.
Getting into trouble

Two months after first legal notice, (meaning five months after not repaying loan amount), another legal notice will be sent. The notice is to inform about the estimated value of the house and for auctioning it. A date is fixed for auctioning, which is usually one month after the notice is issued. Normally, in housing loans, there are not many NPA cases. So banks do not take immediate action and keep pressurising the account holders. Even then, if the person does not respond, then legal action is taken.
What banks can do, cannot do
To protect the usefulness of the loaning agencies, Parliament has approved a law in 2002, called Survey C. According to this, if a housing loan is not repaid, the bank will seize the property and put up for auction. Prior to this, banks do examine other options. Their job is to try to collect the pending repayments. The extreme option is taken only when the others have failed. Because, the primary job of a bank is to give loans and try to get the amounts back.

You might need to pay Capital Gains interest towards the amount that has been credited in your account. Selling it within 36 months from the date of buying, gaining profits (after subtracting the invested amount), you will need to pay tax on the gains on Capital income. Which means, these profits should be shown in your annual returns and you should pay the tax, if it incurs any.
If you sell the house, three years after you have bought it, the profit is less due
to inflation. To avoid tax on interest on Capital Gains you can invest the amount in government bonds. Or you can buy another house within six months, with the amount.
Selling five years later
If you have to sell the house five years after buying it, you must remember that the tax exemption that you enjoyed over the loan, under Section 80 C, will no longer apply. If the loan is not cleared, the bank will then auction the house and sell it.
Affects credit score
According to Credit Information Companies Act 2005, concerning all loans by financial institutions and failure of repayments, CIBIL and other information gathering units are notified. Your credit score will automatically reduce, in case of failure to repay the loan.
How to face
If housing loan is not repaid within a certain date, banks will seize the house and auction it. At this juncture, it is not wise to argue with the bank officials or representatives. Explain the situation and behave respectfully with them, to resolve the problem in an amicable manner, if possible.
Reviving the loan
There are not many cases, where housing loans are not cleared. If such a situation arises, it is necessary to study the reasons behind it, like losing the job or illness. These are temporary situations. So approach the bank officials and explain the situation to them. Also assure them that you will clear the loan as soon as possible. If you have taken a loan previously and cleared it on time, you can show proof of this. If the bank officials are satisfied, they will revive your loan.
Bank says 'no'

Transferring investments
If you have any other investments like Fixed Deposits, Mutual Funds or equities, and you are unable to repay loan, you can transfer or divert those funds towards this. As such, your house will remain intact.
Let go of the house
If there is no chance of protecting your property, you will have to sell it. Instead of waiting for the bank, you can do it yourself. You will have the chance to sell it to the right party, at the right price. Sell it off for a good price, clear the bank loan and with the remaining amount, buy a new house in the outskirts of the city.
Certain rights of debtors
There is no need to give up your rights, just because you owe the bank some amount. Before selling the property, banks should give sufficient time to the debtors. Property of those who do not repay loan for at least 90 days in a row, is considered as NPA. Banks have to give notice after 60 days. Which means, you had two months of time to repay. The notice, stating that your time limit is extended for another 30 days, with a warning to auction the property, is given. If the property has to be sold, banks authorities will send valuators to the spot to evaluate the property. Also, they have to mention in the notice, where, when and for how much the house is being auctioned. If you think that the amount is not right, you can express you objections. Banks should respond to this, within seven days. If you are able to show a better offer, the bank can rethink.
For Personal loans

The situation worsens after 60 days for such non-repayment. Anyone can call you and ask you to clear the loan. The calls might come at any moment, during the day or night. If you have taken the loan from a Non-Banking Financial Corporation (NBFC), the situation is worse than this. Collection workers will keep coming over to your house and office. They will put up the matter in social media, like newspapers. If the deadline of 90 days is over and property becomes NPA, it is handed over to special agencies. These agencies will bring about mental and social pressure and even threaten. If still you do not pay, you will get court notice under Section 58, which is punishable.
More Articles

Joint life insurance policy for couple...how beneficial?
2 years ago

Are you using the right charger for your phone? Check out
2 years ago

Shoot amazing videos with mobile phone
2 years ago

How to delete, block emails in Gmail?
2 years ago

Are your eyes healthy? Identify eye problems this way
2 years ago

Government services at your fingertips with these apps
2 years ago

Ways to increase height: Any options?
2 years ago

Life after death…what organs can be donated…give life to how many?
2 years ago

Phones costlier than Apple iPhone
2 years ago

Hyderabad Metro Rail halts..facilities in stations
2 years ago

Green peas curry...tasty for chapattis, paratas
3 years ago

Age for insurance cover. Need it for 100 years?
3 years ago

Shares that will go up in 2018; recommended by brokers
3 years ago

These are New Year resolutions of celebrities...what about us?
3 years ago

LIC policy that protects you from cancer... less premium, more protection
3 years ago

What do kids like... what they don't?
3 years ago

Lens resolution and not pixels make the difference in camera...unknown facts
3 years ago

What is the truth about North Korea?
3 years ago

Open zero balance account in any bank
3 years ago

Separate test for each health problem... what is known in which test?
3 years ago

Do this to increase life of phone battery, backup
3 years ago

New scooters that will arrive at your doorstep soon
3 years ago

Health insurance from banks... less premium...how worthy?
3 years ago

Has your smart phone slowed down? Here are tips to speed it up
3 years ago

Dental plaque formation, causes and care
3 years ago

Cholesterol is good...But when is it bad?
3 years ago

Make tasty panipuri at home
3 years ago

P2P platforms help easy lending, borrowing
3 years ago

Why Apple iPhone is expensive? Want it for less price?
3 years ago

Tips to cool down your heated smart phone
3 years ago

Which is better...own or rented house?
3 years ago

App that listens and types in Telugu
3 years ago

Jaundice could be dangerous if neglected
3 years ago

Sponge cake in a jiffy...no oven...with and without eggs
3 years ago

What happens when you don't repay loans
3 years ago

Yogurt, curd, dessert, paneer, cheese...what's the difference?
3 years ago

IT dept. eagle eye on bank deposits... what to do?
3 years ago

Google Tej app...transfer funds in a jiffy
3 years ago

Truths about money, you must know
3 years ago

Huge benefits with Multani Mitti
3 years ago
Advertisement
Video News

Minister Eatala welcomes Centre’s decision to make covid vaccine free for Indians
39 minutes ago
Advertisement 36

Promo of Extra Jabardasth ft. Rashmi, Sudigali Sudheer, Varsha & Emmanuel, telecast on Jan 22
1 hour ago

CM Jagan observes corona vaccination process in Vijayawada after launch
1 hour ago

Vaccination drive: PM Modi recites poet Gurajada Appa Rao’s famous quotes in Telugu
1 hour ago

Nara Lokesh makes sensational tweets on AP DGP
2 hours ago

Pawan Kalyan speaks whenever Chandrababu comes under attack: Kodali Nani
2 hours ago

PM Modi launches vaccine drive against covid in India
2 hours ago

Chandrababu condemns Palasa cops registering false case against TDP MP Rammohan
2 hours ago

Dr Reddy’s Laboratories gets DCGI approval for Sputnik V phase III trials
3 hours ago

Sonu Sood's Pagal Nahi Hona song wins hearts
3 hours ago

PM Narendra Modi to launch Corona vaccination drive today
4 hours ago

WhatsApp postpones privacy update plan
4 hours ago

7 AM Telugu News: 16th January 2021
5 hours ago

Actress Nithya Menen enjoys swinging, adorable moments
5 hours ago

17 killed in road accident as minibus collides with truck in Karnataka
6 hours ago

WWW movie teaser is out, watch it
6 hours ago

Historic vaccine drive tomorrow: Health Min reviews preparations for vaccine drive
14 hours ago

Sankranthi celebration at Chiranjeevi’s house; Nagarjuna joins the Mega family
14 hours ago

9 PM Telugu News: 15th Jan 2021
14 hours ago

AP DGP Goutam Sawang on attack at temples
15 hours ago