Diwakar Kumar Singh is an accomplished content creator with over 6 years of experience in crafting both long-form and short-form content.
When you take a loan, it is considered a serious financial commitment, and by law, you have to repay back as per the law and guidelines. But, in case of unavoidable emergencies, you might not be able to repay the loan. In this article, we will explain everything about loan defaults, actions taken by lenders in a step-by-step manner, and what the laws are about loan defaults. So, stay with us till the very end to learn about loan defaults in India.
Well, immediately nothing significant happens, but if you repeatedly miss the payments, then it is going to be a big problem for you. Let us see what the issues are that you may face:
Now, this is a question which we have been asked multiple times. Please understand that loan default is primarily a civil matter and not a criminal matter by usual standards. However, the exceptions are there, and it may lead to criminal charges. The following are the exceptions:
Please note that after 7 to 10 years, lenders just write off bad debts, and credit bureaus stop reflecting them on your report. However, unresolved legal issues may continue even after the said duration.
If there is an emergency and you have genuinely been unable to repay the EMIs, then the following are the steps that you can take:
In India, there is a structured legal process for personal loan default in India. Let us understand from the following steps:
Please note that even as a defaulter, you have certain legal rights safeguarded by the RBI. The following are the rights:
Not repaying your EMIs is considered a serious civil offence and can have a severe impact on your credit score as well as creditworthiness. However, if you have not been able to repay your loan, then there are standard and legal actions that your lender can take, which include the issuance of notices to court action. Whatever action chosen by the lender has to be fully compliant with RBI guidelines, as even if you are a defaulter, you have legal rights and protection against any sort of abuse or harassment. Solutions exist if you do not ignore your financial condition and discuss upfront with your lender regarding your genuine financial condition.
If you are unable to pay your EMI, contact your lender immediately. Explain your situation and request a temporary relief, loan restructuring, or revised EMI schedule. Avoid ignoring the issue, as delays can harm your credit score and lead to legal action.
Yes, missing even a single EMI can reduce your credit score by 50 to 100 points. Repeated defaults can significantly damage your credit profile, making it difficult to get loans or credit cards in the future.
Loan default is generally a civil matter, not a criminal one. However, if it involves willful default, cheque bounce, or fraud, criminal charges may apply. It is always best to resolve issues early with your lender.
Loan restructuring allows you to modify the terms of your loan, like increasing the loan tenure and thus reducing EMI. You need to formally request this from your lender, and approval is based on their internal policy and your repayment history.
Yes, if you have no means to repay and a legal recovery has started, you may declare bankruptcy under the Insolvency and Bankruptcy Code (IBC). However, it has serious legal and financial consequences and should only be considered as a last resort.
Diwakar Kumar Singh is an accomplished content creator with over 6 years of experience in crafting both long-form and short-form content. A gold medalist in MBA (Marketing) from IMT and a qualified petroleum engineer, Diwakar brings a results-driven mindset to his work. His passion for writing enables him to produce compelling and engaging content that resonates with diverse audiences.
LinkedIn: https://www.linkedin.com/in/dksinghone992
Diwakar Kumar Singh is an accomplished content creator with over 6 years of experience in crafting both long-form and short-form content.
Want to turn your smartphone into a cash machine in 2025? India’s app scene is buzzing with free, no...
Read more...India’s digital economy is on fire—online earning platforms gained 25 million users in 2024, with in...
Read more...In 2025, instant personal loan apps have transformed how Indians access funds, offering a seamless,...
Read more...Financial jargon, whether taking a loan or opening a bank account, can be confusing and tricky. Thes...
Read more...Establishing and maintaining a healthy credit score can seem overwhelming, particularly for new borr...
Read more...When purchasing items on credit, it is common to need a financial investment and many turn to loans...
Read more...Foreign banks bring crucial international expertise and capital to India’s BFSI industry, benefiting...
Read more...Peer-to-peer lending, or P2P lending, offers a way for individuals to borrow and lend money without...
Read more...The role of cooperative banks in a rapidly growing nation like India is of immense significance. The...
Read more...Established on the recommendations of the Narasimhan Working Group in 1975, Regional Rural Banks (RR...
Read more...Drop a Mail or give us a Missed Call & Begin your Investment Journey here