More specifically, the CIBIL score that you have determines your financial health. It can be ruined forever by unpaid loan installments. Do not worry if you cannot repay your loan due to financial strain. You can take sensible steps to protect your credit score against falling into the abyss and ensure future loan decisions. Here are the 4 tips for handling this difficult situation about the preservation of your CIBIL score.
Loan Repayment 4 Essential Steps
Speak to Your Bank Manager
The first and foremost action to take if you have defaulted on a loan installment is to approach the bank. Go to the branch where you have availed the loan; get in touch with a bank officer and speak to him/her directly. Share your condition in financial verbatim; assure them that you never intended to default. Banks do tend to work with people when they face such hardships temporarily. Doing this very early puts one in a good position to avoid penalties and build a good score with their CIBIL.
Pro Tip: If your bank understands your situation, they may waive additional fees or offer a flexible repayment plan. This little step can save further damage to your credit score.
Check Your CIBIL Score
One missed installment can affect your CIBIL score, however, the severity worsens with further installment defaults. If you missed a one or two installments, contact your bank and request the bank not to make that delay report to credit bureaus. Guaranteeing them of this being a just one-off case and that you’ll return soon to regular payments will be welcomed by banks.
Why It Matters: Although only one installment is missed, accruing such notifications from the bank proves detrimental to the credit score, making it difficult to acquire loans in the future. If this issue is approached early on, there won’t be any long-term impact.
Opt for Suspension of EMI
If you are having a temporary cash-flow problem, approach your bank to suspend your EMIs for the time being. Most banks offer services like these for customers who have a temporary cash crunch. After a few months of EMI suspension, you may be able to develop financial stability and pay off your loan successfully without defaulting.
This helps: With this temporary relief, your CIBIL score will not be reduced, and it will give you a specific time for recovery. Your payments can resume as soon as your position improves, and you won’t have to worry too much about long-term damage to your credit score.
Convert to Arrears EMI Payments
Switch to an arrears EMI plan instead of defaulting if your income is either irregular or deferred. Standard EMIs are paid at the beginning of month whereas arrear EMIs are paid at the end of the month. This flexibility should allow you to structure your payments with respect to your income cycle which will help prevent any late installments.
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