It is important to know what happens if you default on a secured loan. The asset or collateral used to secure the loan can be jeopardised if the borrower is unable to make timely payments, which could cause the loan to default.
If you don't budget your money and borrow loans haphazardly, there's a significant possibility that your finances will get out of hand and you'll have to default on your debt payments. You should take into account your ability to pay and only take out a loan if it is required.
What happens when you default on a secured loan?
Under Section 138 of the Negotiable Instruments Act of 1881, the lender has the authority to take legal action against the borrower if the debt is not repaid even after 180 days. The lender will use all available recovery techniques, such as issuing two reminders and a recall letter, before taking legal action.
Get home loans without hefty paperwork through NoBrokerThe recall letter will be the last reminder, and it will expressly state that the lender would take legal action if the debt is not paid in full by a certain date.
The lender can provide options like debt modification if the borrower submits an appeal and provides sufficient justification for the non-repayment.
The lender might file a lawsuit against you if you don't pay back your debt. The court will then order that you repay the debt in full or risk additional sanctions like asset forfeiture or wage garnishment.
If payments are not made on time, the lender can also send debt collectors after you and report the debt to credit bureaus.
The lender will notify the borrower about the sale of the asset and the date of the auction if the borrower ignores such reminders.
When a mortgage on real estate is designated as a non-performing asset, a notification under the SARFAESI Act will be delivered with enough time to make the required payments under the law. A notice saying that the property will be auctioned off on a specific date would be sent if the debt was not paid in the allotted amount of time.
Calculate your EMI on a home loan via the NoBroker EMI calculatorI hope these clarifies your query about what happens if you don't pay a secured loan.
How to Avoid Default or Non Payment of Secured Loan?- Well-planned budget:
Plan the EMI in relation to your monthly income, and you will be able to return the loan on time until the conclusion of the term.
- Discussion with the lender:
Discuss your financial condition with your lender to get some relaxation in the form of an extension of the due date
- Make part payments:
To lower your EMI, you can make part payments
- Cut down on expenses:
Plan your finances and cut down on unnecessary expenditures
I’d like to conclude my answer here about what happens if you default on a secured loan. I hope this helps:)
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What Happens if You Default on a Secured Loan?
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2023-04-27T23:14:34+00:00 2023-04-27T23:34:44+00:00Comment
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