But for it you should not run away from the lender and instead inform the bank about your incapacity as well as the correct reason for the same. Then, after due verification of the concerns cited by you, banks can offer you any of the below option to get away with the financial liability at hand.
1. EMI or debt rescheduling: In case the bank judges that the high monthly EMI is taking a toll on you and due to which you are in a difficult credit situation. Bank may revise the EMI for you by extending the tenure, though the extension would mean higher interest outgo, nonetheless it shall be a boon for you during your troubled financial times.
2. Revising loan repayment period: In case of big ticket loan such a s a housing loan, RBI allows banks to extend the loan repayment period by not more than a year. In case even after the available provision, borrower is seen in a situation wherein he fails to service the obligation, foreclosure of the loan account by sell-off of the collateral held by the bank is suggested. However, this is not the mode sought by banks either as it weighs over the non-performing assets of the bank (NPAs) and banks lose on the amount they would have otherwise realized on financing a concern.
3. One-time settlement: For unsecured loan accounts, more so in the case of credit card, banks offer one-time settlement wherein against the outstanding loan amount, the borrower is asked to pay a lump sum amount to clear off the liability. With this, the bank waives off some of the loan charges and fees. But, remember lump-sum or one-time settlement wherein bank provides you a waiver in respect of some loan amount and charges reflects on the credit score and in a future instance you may find it difficult to secure a loan or may get it a higher rate of interest.
4. Conversion of unsecured loan to secured: As stand of lenders is rather strict in case of unsecured loans as against the secured loan, banks if see the need can allow you to get the loan account converted. The conversion will then translate into lower rate of interest and correspondingly low EMI.
5. Banks also allow payment interest holiday: Banks even allow the payment interest payment holiday to the loan borrower at its own discretion in case the borrower ask for and the bank validates the reason. Nonetheless, for the allowed provision which is not per the earlier agreed terms, banks charge a fee or a penalty.
6. Refinancing of existing loan: In case as a borrower, you are not convinced by the interest rate charges levied on the particular loan account and see that the offered rates show a significant variation from the prevailing market rate, you can either approach your bank to reduce the rate of the floating rate of interest in line with the market rate or may go to another financial institution i.e more amenable and you see your financial position to improve in such a case.
So, here are listed few of the provisions which the banks can allow based on your financial position for getting rid off your loan liability without much worries.