A borrower’s biggest stress is that they would lose the asset.
Banks or financial institutions usually provide a 60-day prior notice, if you miss your EMI.
Fulfilling the dream of having a car is comparatively easier than before. There are various loan and Equated Monthly Instalment (EMI) options you can opt for. Due to certain situations or financial crunch, you may not be able to pay the EMI for your car loan on time. In case of default on your car loan, the biggest stress for the borrower is that they would lose the asset. In certain situations, if you fail to pay your EMIs, the finance company does take up some recovery actions. They might even take your vehicle. Banks or financial institutions usually provide a 60-day prior notice, if you miss your EMI. Your account will turn into a non-performing asset (NPA) if your repayment is more than 90 days. Once your account becomes an NPA after failing to pay the EMI for three months, the lender will start taking action. In this case, they have the right to pick up your vehicle. In the second month, the lender will try to contact you through letters, phone calls, or emails.
After the third month, if you don’t inform them or pay them some amount, they will take action against you. If you pay some amount with the penalty, the lender will allow you to have some space, but not for too long. After your account becomes NPA, they will visit your house, complete the paperwork and pick up your vehicle.
Once a vehicle is picked up, the lender will still give you another chance to recover your car. For that, you need to pay the EMI for four months with penalties and charges for parking the car at the warehouse. If you don’t decide on a voluntary repossession, then there are certain steps that you might take as a borrower. A voluntary repossession is when a borrower decides to surrender the asset to the bank. You need to remember if you opt for voluntary surrender that will affect your credit report.
The lender can’t force you to take the vehicle or misbehave with you. If this occurs, you can file a police complaint. The lender is not allowed to provide any information regarding the car loan to anyone other than the borrower. In case of a financial crunch or an emergency, you can contact the lender and mention your issues. The bank might allow you some extra time, but you might have to pay extra interest and penalty charges.
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