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To Repay Or Not To Repay, That Is The Question…

When a person is in need of a large sum of money to invest in or buy an asset they borrow money or take a loan from a bank or financial institution. By doing so, the borrower is bound to pay back that sum of money to the lender in monthly on yearly installments, or part by part.

Every loan has a tenure in which the borrower has to pay back the principal amount to the lender with an added interest. These installments are to be paid on time every month or every year. An interest is a sum the borrower has to pay the lender as a cost the loan is given at. It is usually a percentage of the principal that the borrower has to pay along with the installment.

Loans are of many types the main two being secured loans and unsecured loan. Secured loans are loans in which an asset of the borrower is promised to the lender. A mortgage loan is a secured loan. An unsecured loan is a loan in which no asset of the borrower is attached. A personal loan is a kind of unsecured loan. If a borrower fails to pay one or many installments on time a default occurs. In such cases, the lender classifies your loan as a defaulted loan.

Such a status can have adverse effects on the borrowers chance to get another loan in future. If the defaulter continues this pattern of not paying his installments on time it might lower his credit rating. Financial bodies refer to these ratings to decide whether to sanction a loan to borrowers.

If the borrower fails to pay his installments, defaulted loan notifications are sent to him. These notifications are not to be ignored. The longer the borrower ignores these notifications the worse the situation gets. Non-payment of installments or the loaned amount is also a criminal offence. The financial body that lent the money may use various techniques on a borrower to pay up. Default loan harassment is the most embarrassing and irritable technique. The lender keeps calling till you pay the amount due. They send agents to show up at your house and harass your family. The lender might also usurp the asset attached or mortgaged in case of secured loans. Once the asset is taken in there is no way to get it back but to repay the loan amount.

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May 14, 2012 um 10:16 am
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