What are the rules for Bank to Auction your Property if you do not Pay EMI on Time?
When does the auction come in case of non-payment of loan and what are the challenges one has to face? learn here
You must make on-time payments on whatever loans you have acquired. If you are unable to pay back the loan on time, the bank may begin to take legal action against you, which could put you in risk.
We take out a home loan whenever we buy a house or have one built, and we do the same thing when we want to buy a car. Because you must guarantee these loans by pledging some form of property to the bank, they are classified as secure loans.
It goes without saying that you must repay any loans you have taken out promptly. If you are unable to pay back the loan on time, the bank may begin to take legal action against you, which could put you in danger. Know what difficulties you can experience if you don’t pay back the loan instalment.
1) First the Bank sends the reminder to you
The bank first sends you a reminder if you miss two loan EMIs. Your bank will send you a legal notice requiring repayment of the debt if you skip three consecutive instalments on your mortgage. However, the bank will still designate you a defaulter if you do not finish the EMI after the warning.
2) If your Record was too bad
If you default on the loan, it will destroy your reputation and lower your credit score. You won’t be able to obtain a loan from the bank with ease the following time in this circumstance. Even if you managed to borrow money from Jugaad, the loan will come with severe terms and a high interest rate.
3) NPAs before Auction (For 3 Consecutive Loan)
If you fail to deposit three consecutive loan payments with the bank or financial institution from which you obtained the loan and fail to pay the EMI after receiving a warning from the bank, the bank would classify the loan account as non-performing assets (NPA). This window is 120 days for other financial institutions. Whoever is in default in such a scenario will receive a legal notice. The payment of the debt will be required in this case within the allotted time.
4) Your Mortgage Property comes in danger
In a secured loan, the property is mortgaged so that, in the event of loan default, the bank may sell the home to recoup its losses. Your mortgaged property is put in peril in this scenario. You can lose ownership of the property you have a mortgage on. This is the bank’s right.
5) The Last Option is Auction
The bank gives the borrower a lot of time to pay back the loan. However, the bank would issue reminders and notices to the borrower if he is still unable to pay back the loan. Even after this, the bank will seize the borrower’s property and sell it at auction if the borrower does not repay the loan. In other words, the bank offers numerous possibilities for loan repayment, but in the event of non-payment, the loan amount is repaid by selling the property at auction.