One may take up a loan based on his/her needs and this may
be due to an emergency or if the time is opportune to fulfill a goal such as
purchasing a car. Whatever the reason may be, most of us at a given point of
time in our lives will end up availing a loan. While the value they serve is of
utmost importance in fulfilling our needs, loans bring with them a huge
responsibility and financial commitment. The borrower will have to curtail
expenses to make equated monthly installments(EMIs) and there will always be a worry of paying
off the next installment.
These equated monthly installments or EMIs are structured around
the tenure of the loan and the amount borrowed. Unless there is an intention of
fraud, most borrowers have every intention of repaying the loan amount. But in
life, emergencies come unannounced and there are certain scenarios that come up
which prevent the borrower from making these payments. This could be the loss
of employment, medical emergencies or unforeseen expenditures that may arise
and prevents an individual from making the monthly payments and if one or more
payments are missed, it could lead to serious consequences.
The main impact of missing payments are that it adversely
affects the borrower’s credit score. This will make availing future loans very
bothersome. The easiest thing to ensure payments of EMI’s and protect the
credit score is to borrow the required amount from friends and family members
to tie over the next few payments.
If there is a
continued difficulty in meeting monthly payments, one should intimate the
financial institution the amount was borrowed from. Most banks will try and
figure out an alternative solution as they would not want borrowers to default
on their loans. They may not alter the total amount but would be willing to
lower the installment amount by lengthening the tenure.
During times of a
financial crunch, cutting out expenses wherever possible and only making the
necessary payments may help tide things over for a while. The small concessions
made will add up over time and bring much needed relief.
If there are any other investments made, they should be broken
wherever possible if the penalties applied on missed payments far outweigh the
returns from that investment.
Difficult situations are very hard to predict but when
such situations do occur, one should be calm and collected and follow these
steps to ensure they don’t go further into debt. Worry and inaction will only
lead to further trouble.
