The home loans default is a process of not paying the installments of the loans being taken. The bank can take legal action against the defaulters of the loans. There are two types of defaulters one is the willful defaulters and the others are the ones who default due to the financial constraints or incapacity to repay the installments due to financial problems. The home loans default can lead to the seal of assets of the borrowers which the bank can auction to the other person and recover the defaulted loans. The defaulted loans are also called non-performing assets or else bad debts. The non-performing assets of the banks are rising steadily of the banks due to default of loans by the borrowers. The coronavirus pandemic is also one of the major reasons due to which the bad debts of the banks have risen of the banks. The pandemic has led to salary cuts and job losses especially amongst the poor or the lower-middle-class public which has lead to a surge in default of the loans. On a usual basis also some defaults do happen due to similar reasons which lead to financial constraints and due to that loans are defaulted.
The banks or the NBFC can charge even penalties on the loans if the installments are not paid within the time limit. Beyond that, the bank recovery agents may visit the property and may question the defaulters. As per the RBI mandate, the third-party recovery agents which are appointed by the banks cannot harass the borrowers for the default of loans as there could be some genuine reasons behind the non-payment of the loans installments. The RBI had passed the circular regarding this which was approved by the banks & the NBFC’s. But still, some illegal activities are carried out by the banks & NBFC’s who harass the public for the defaults. There are various rights that the defaulter still has which one should know while availing loans. It is mandatory that if the default of the loans continues then in that case the property on which the loans are taken should be surrendered by the borrower to the lender. Also, the entries are made in the CIBIL records regarding the default of loans due to which the borrower cannot avail of loans from any of the lenders. Also, the CIBIL ratings may go down due to the default of the loans.
Following are the important rights of a home loan defaulter
- To save themselves and family from harassment in case of loan default
The banks are allowed to take only legal action against the home loan defaulters. If any harassment is done by the recovery agents for the recovery of loans the borrower has the right to complain to the reserve bank against the bank. The RBI has the right to take action or penalize the banks for their wrong deeds.
- Notice period to vacate the flat
The loan if is not repaid consistently for 90 days then in that case the bank has to serve the notice regarding the seal of assets. Post to that the bank has to give a grace period of 60 days to the defaulter failing which to repay the loans the borrower has to vacate the property to hand it over to the bank. Before selling the house bank has to declare another public notice of 30 days before selling the assets.
- Right to claim the balance amount
The bank may fetch a higher value for the property being sold than the loan being disbursed. In that case, the bank recovers its own money and then has to pay the excess amount gained to the borrower if the property fetches a higher value in the auction than the previous purchasing value of the borrower.
- Request to the bank
The borrower can express the financial situation to the bank officials if the borrower is facing difficulties in repayment of loans. The bank officials if they found the reason genuine then, in that case, can find ways for the borrower to repay the loans easily.
The borrower may request the following solutions:
– To provide a higher duration of time to repay the loans.
– To reduce the interest rates on the loans.
– To increase the tenure of the loans to reduce the burden of monthly installments.
Thus various rights are being given to the home loan borrower even in case of default which the borrower should be aware of. Defaulting a loan is not a crime if the borrower is not a willful defaulter. But the borrower must repay the loans on time. Failing to repay the loans on time the bank has the authority to seal the assets after serving the notice period.