Personal loans are very useful in emergencies and banks make them available easily, sometimes even within minutes. However, since it is an unsecured loan for banks, it is the customer's responsibility to repay it on time.
If you are unable to repay a personal loan, it can have serious financial and legal consequences. The bank can take legal action to recover the outstanding amount, which can damage your credit rating and make it difficult to get a loan in the future. You may also have to pay a heavy penalty.
What legal actions can be taken for not repaying the loan?
In India, a civil suit can be filed against a personal loan defaulter. Banks can file a case against the customer in civil court to recover the outstanding amount. If the loan is not repaid, the defaulter's property can be seized or salary can be confiscated.
Can affect credit history -
Not repaying a personal loan can have serious consequences. This can spoil your credit history, which will make it difficult to get a loan in the future. Not only this, the bank can also register a case of fraud under Section 420 of the Indian Penal Code, which provides for a jail sentence.
Banks can resort to loan recovery agencies-
When banks are unable to recover the loan amount from a customer, they can resort to loan recovery agencies to recover the outstanding amount. This can cause harassment to the borrower, which can cause a lot of stress and anxiety.
What are RBI's guidelines for personal loan defaulters?
The Reserve Bank of India mandates fair behavior in the recovery of personal loans. In cases of loan default, banks have to follow RBI guidelines, which include giving notice to the customer before starting recovery. RBI advises banks to maintain proper and respectful communication and avoid harassment.
Disclaimer: This content has been sourced and edited from Hr Breaking. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
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