6 Consequences Credit Defaulters Have to Face in India

There are certain mistakes which make life miserable. And one such mistake is a credit card / loan defaulting. These two words can shackle your life in a big way and their consequences are simply very terrible. And not many of us are aware of the impact of defaulting.

Depending on the type of credit or loan taken and lender, the consequences differ.

Here are the consequences defaulters have to face:

Account closure:

To those who are not aware of what happens when you default, banks will first close your account (loan or credit card), marking it as a delinquent or non-performing asset (NPA). This happens after 90 days of non-payment.

Banks will report your default status to the credit bureaus. Now if you apply for a credit card or loan elsewhere, your credit report will be fetched by the applicant bank from the credit bureaus. This report contains personal/professional/business contact details, loan or credit card details, repayment history, debt status, and many others. And most likely your application will be rejected. This rejection is further reported to the credit bureau. Remember multiple applications also has a negative impact on credit score.

Harassment by collection agency:

Account closure by the bank is not the end. The real trouble starts when banks pass on your case details to the collection agency or recovery agents. Their only objective and business is to get banks their money back and that’s what they work for. Banks hire in thousands to reduce their non-performing assets and pay commission which is certain percentage of the amount recovered.

So first, defaulter will get multiple phone calls from the collection agency asking for making the complete repayment along with the interest. If this does not solve their objective, they will not mind entering your home or office and start harassing you for recovering the money. If this too fails, then get ready to see your belongings to being taken away forcefully by the collection agencies.

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Additional reading: Credit card for defaulters.

Home/Car/Bike Seizure:

If you have taken loan for car/bike/home and default on EMI, then be ready to face the worst. All your hard earned belongings will be taken under control by the banks and becomes their property. And they can do anything with the seized assets. Mostly they put it on auctioning to recover from the losses. So you will see all your assets getting auctioned in front of you. This certainly will give you sleepless nights.

Check out how cibil defaulter can get personal loan.

Contact employer:

While taking any credit card or loan, if you mention employer’s name then bank or collection agency may approach your company.

Legal action:

If the debt amount is huge, then be ready to face legal action. You will have to start appearing for court proceedings.
Remember money is not free. And everyone has right to recover the money and so has the bank. And irrespective of the reason for default, you are likely to face above mentioned unavoidable consequences.

Harass guarantors:

If the loan taken has guarantor involved then in addition to the defaulter, guarantor will have to face harassment by the recovery agent.

Reducing the impact of default:

Impact of defaulting can be reduced by talking in advance with the lender. For e.g. if you think that your job is at risk and you have taken home loan, then you should talk with the lender beforehand and explain the condition. If your past repayment history is good, lenders may reduce the EMI and increase the tenure. Personally visiting them should help in such scenario. Do not hesitate. In fact, lender can assist in giving more solutions to your problem.

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