Loan Repayment Default - EMI Default | Hindi - YouTube

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Namaskar, my name is Mukul

And you are welcome to the Asset Yogi

Where we unlock the knowledge of finance

I have made many videos on loans previously and covered every loan in detail

Like home loans, loans against property

Loans against FD, loans against shares

Personal loan, gold loan. We have covered all these in a detail

And you asked many questions and these are quite common questions

In every loan. For example, if your EMI gets the default

Then what happens in this case? Whether the bank gives you a grace period

Or your whole loan defaults

And you are not able to pay

Your financial situation is not good

So what happens in this case? What options do you have?

What are the consequences of defaulting the loan?

I will answer all these questions in this video.

So stay tuned with the video because it will surely be of help to you.

Let's go straight towards the blackboard.

Firstly, let's talk about unsecured loan default

Now, what is an unsecured loan?

A loan without any security

The bank doesn't have any collateral or asset

To sell and recover the money

If you do loan default.

For example, if you do personal loan default or education loan default.

Or default the payment of credit card

So in this case the bank doesn't have any security.

Which they can sell and recover the money

So what happens in this case

When you do the default of an unsecured loan

If I talk about the small consequence

Then you are charged with cheque bounce charges

Or you have to pay the EMI default charges.

These charges can be 250, 300, 500 Rs

But I am not bothered with this thing that much.

The most important thing is

The larger consequence if I talk about it

The credit card payment default or loan default you do

Of whatever bank or financial institution

They will report it to CIBIL or the credit agency.

I have already made many videos related to the CIBIL score

So you can watch those videos. You will find the links in the description.

So once they are reported to the CIBIL

That you have defaulted on the loan. Then your CIBIL score gets hampered.

Now, I have already told you about the CIBIL score

This ranges from 300 to 900

The higher the CIBIL score the better for you

750 plus score is considered as a good score

But if you default on any loan or if you do default on a big loan

Then maybe your CIBIL score will go below 650

If your CIBIL score goes below 650

Then any bank or financial institution

will niether provide you loan in the future.

nor credit card.

You may not need the loan today but you may need it in the future.

So the first thing is that it takes a lot of time to make or improve the CIBIL score or credit score.

Or once you have ruined or decreased your CIBIL score

Then it will take a lot of time to improve it.

And it may take 3 to 4 years to come back to the same score.

So please, don't do the default on any unsecured loan.

Maybe the bank doesn't have any securities

But then also you should not make any default to your loans and credit card .

Now we will talk about what happens when there is a default on a secured loan

What is a secured loan?

Any loan which is backed by security or any collateral.

Assume there is a home loan,

In this, your property is being mortgaged

There are other loans of the property like loans against property

Or there is a car loan, your car is being mortgaged.

In a gold loan, gold loan is being pledged or is mortgaged

In the same way, there is a loan against FD, there's a loan against shares

There's a loan against mutual funds,

All these are secured loan

A loan that is backed by any asset is called a secured loan.

So in the case of secured loan,

Bank can recover their money by selling the asset

So what are the consequences of its default?

Smaller consequence as I have told you

That you have to pay the cheque bounce or EMI default charges.

Whatever it is 200, 300 or 500 Rs

So two big consequences come under this.

The first is you will lose your asset.

Whether it is FD, mutual funds, house, your car, or gold.

The asset, whose against you have taken the loan

The bank will sell it.

And you will face the loss of assets.

And with that, there will be a loss of credit score.

All these things are reported to the CIBIL and your CIBIL score gets hampered.

Now we will talk about the loss of asset

What is the recovery process of the bank?

How does the auction of this asset take place? We will find out.

And with that, what are your rights? We will also talk about them.

So the recovery process of the bank starts with

The notice- firstly you will be given the notice for the payment.

So the notice is given for whatever the EMI has defaulted.

Whether you have defaulted only one EMI, then also you will get the notice.

If you have defaulted the 2 EMI, then also you will get the notice.

Once you defaulte the 3rd EMI,

Then the default of more than 90 days is categorized under NPA

NPA means Non-Performing Asset.

As soon as you have a default of 90 days,

The bank can take legal action against your property

Against whatever your assest is.

And by any chance, the borrower dies

What happens in that case ?

If the loan is insured

If you have taken home loan insurance

In that case, the bank will recover their

Dues through the insurance.

And if you haven't taken any loan insurance of any kind

So notice will be given to his nominee or legal heirs

Whoever is the borrower died. So they can clear the dues of the loan

And after that, they can get the property on their name.

If the bank doesn't get any response from the nominee or legal heirs

So in this case also the bank starts the auction process

So two cases have happened here. In the first case, if there is

a 90 days default and the borrower is alive, then the auction process starts

And if the borrower has died then the bank will recover the money from the insurance

Otherwise, they will try to recover from the nominees or legal heirs.

And if the bank doesn't get any response from the nominees or legal heir

Then the bank start the auction process in that case also

Now we will talk about the auction process

Firstly the notice of the auction is given to the borrower

Whenever your loan has become the NPA, whenever it is categorized as an NPA

You will get the notice to auction after 60 days.

And you haven't made the payment during that time

Then only the auction process is initiated

Otherwise, assume you have paid the money during these 90 days

Then also the auction process will not start. And if you made payment in these 60 days

Then also the auction process will not start.

But if you didn't pay the money during the notice period of these 60 days

Then the auction process will start

The bank has to provide you with some details in the notice to auction period.

First is the reserved price of the asset and the property in the auction.

They have to tell you that. And they have to tell you the auction date.

And some other details too.

After that, the borrower can raise their objections

And whoever is the authorized person

In that bank

Or the authorized person who is handling the auction.

He has to reply to those objections within 7 days.

And assume you have paid the money in between

And maybe the bank hasn't considered it

Then you can raise objections and inform the bank.

And after that, if you don't have money

Your financial situation is not good or you weren't able to pay for any reason

Then also you can question the reserved price.

Sometimes the banks, not sometimes every time

The reserved price is fixed below 15 to 20% of the market price

The bank keeps the reserve price below the market price

So that they can sell the property easily.

And the bank can recover their loan dues because the main motive of the bank

Is to recover their loan dues. So as a borrower you can question the reserved price.

And if you think that the reserved price is kept low and the market price is high

If you find a buyer who is ready to

Buy that property at the market price or more than the reserved price.

then definitely you can introduce them to the bank and the bank will consider them.

And if someone is ready to pay more than the reserved price.

Then the bank can sell the property to them. So this was about the notice to auction.

Now we will talk about how the auction process is done.

Firstly the public notice is given to auction the asset.

Whatever your asset is whether it is your car, home

Gold or any type of asset

Whether the machinery of your business is being sold.

Then also a public notice is given for the auction

In which, anybody can bid.

All the interested parties submit their bids

Whatever Bid Due Date is given

All the parties submit their bid on that Bid Due Date

After that, whoever is the highest bidder

Whoever bids the highest

The asset is sold to that person

Once the asset is sold

And the bank has recovered the amount

So what happens after the auction

By chance if recovered amount is

Greater than the outstanding loan amount

For example, we will take an example

Assume this is a house and the reserved price was set to 1 crore Rs

And let's say the property is sold in 1 crore

And let's say the outstanding loan amount is 80 lakh Rs

So the bank has recovered this 1 crore

And the bank recovery is done in 80 lakhs

So the rest 20 lakh Rs goes to the account of the borrower

So the 20 lakh Rs comes into the account of the borrower

By chance the recovered amount is

Less than the outstanding amount

Assume the house sold for only 60 lakh Rs.

I will write the recovered amount here.

The actual loan balance was 80 lakh Rs

and the borrower has to pay the rest 20 lakhs

So the bank will recover this 20 lakh Rs from the borrower

If the borrower does the default here also, then the thing is also reported to the CIBIL

And your CIBIL score decreases. So this is the process of unsecured and secured loan default.

So my advice to you is to think twice before doing the default.

If you do the payment default of EMI and credit card

Then your credit history damages

Maybe you don't need the loan right now

But you may require any loan in the future.

And it takes a lot of time to make a credit score

And it takes a lot of time to improve it also.

But as soon as you default a loan

Then immediately your CIBIL score is damaged and decreases.

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