Everyone dreams of buying a car but in reality it is an expensive affair. While high-end luxury cars can cost anywhere between INR 85 lakhs and 2 crores, even buying a second-hand car model can go up to lakhs of rupees. This is why most of the middle-class populace prefers to get a car loan for buying a four-wheeler. Today, applying for a car loan is mostly a hassle-free process as most loan providers demand minimum documentation for car finance. However, while most people might find it easy to avail a car loan, repaying the monthly EMIs could be another story. If you fail to adhere to the repayment terms on your new or even used car loan, you might have to face dreadful circumstances such as severe damage to your credit history or recovery of your car by the bank. To avoid facing any such unfortunate circumstances, it is important to know all about car loan default and measures to overcome it. Read further to know more-
What Exactly Classifies As A Car Loan Default?
A car loan default is when the borrower fails to consistently make repayments on his/her car loan. Generally, the default is registered when the borrower fails to pay on the number of installments limited in the terms and conditions stated under the loan agreement. Generally, a delay of 30, 60, or 90 days is classified as default, depending on the default specifications mentioned in the loan agreement.
Consequences of Car Loan Default
1.Negative impact on credit score
Missing on any repayment reflects poorly on your credit score. When the borrower repeatedly fails to make payments on his/her EMIs, his/her credit score gets negatively affected. In worse situations, the borrower might be barred from taking any further loans over the next few years.
2.Borrower contacted by a collection agency
Typically, the loan provider waits for a stipulated period before your default is passed to the collection agency. The borrower might feel pressurized or intimidated when the collection agency attempts to recover the installment.
3.Seizing of your vehicle
Ultimately, if you are in no capacity to repay the loan, the loan provider would seize your car. Even then, the lender might grant a short period to reclaim your car. However, if you are still unable to make the payment, the bank/loan provider would be forced to sell your car at an auction to recover the loan amount.
Measures to overcome car loan default
Negotiate the terms with your car loan provider to extend your loan repayment period. This could give you some time to manage the funds for clearing your dues.
Request for making a deferred payment on your car loan. Under this provision, the bank/loan provider might allow you to skip the upcoming payment and as most loan providers demand minimum documentation. This could give you some time to collect enough funds for loan repayment.
In case you are burdened with late payment charges on your installments, submit a request to your loan provider to waiver off these extra charges. This might take the load off on your EMI payment budget and allow you to better manage your funds. You can request them for repaying these charges collectively once your car loan is cleared. Since under this provision, you would be able to timely pay your EMIs, the bank/lender may relent.
Also, read about Two Wheeler Loan.
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