Does intermittent home loan installment delinquency bother you? Our expert insight in to the privileges conferred to the borrower who is unable to pay the loan amount within the stipulated time period. Read on to know more…
With the increase in the disposable income of a buyer and availability of flexible home loan schemes, a once loan-averse investor is also willing to purchase a property on loan. The trend is largely witnessed in metro cities, where employment opportunities are driving many working professionals to shift to their own residential base rather than paying monthly rent. However, the majority of home buyers fail to analyze their repayment capacity, resulting in home loan defaults. There can be several reasons for non-repayment of a home loan but this does not imply that the bank or the lending institution will immediately seize the property to realize the loan value.
Usually, a three-month notice period is served to the borrower, if installments are due for long. Besides, there are several other rights that are vested to a borrower. According to Murali Dhar, Principle, Financial Consultant “The Banking Codes and Standard Board of India (BCS61) along with Indian Banks Associate (IBA) has defined some rights of a borrower that can be exercised if one is unable to repay the loan amount. These rights are important to know if anyone is availing a home loan or realises that payment of loan amount in future will be difficult owing to his impending financial instability.”
Notice period to be served
The bank should serve a notice to the borrower before any legal action is taken against the property under question. The notice should include total debt amount to be paid by the borrower and a formal notice mentioning the time period within which the borrower has to pay the amount. A minimum of 60 days’ notice is given if the borrowers account is classified as a non-performing asset (NPA) and the amount falls due by 90 days. If the borrower fails to deposit the amount within the stipulated time period, the bank can sell off the property to realize the loan value. However, the bank has to serve another notice period to the borrower including all the details pertinent to the sale of the property.
Right code of conduct
Representatives from the lending institution have no right to abuse or threaten the borrower. Any kind of bullying or violence will be addressed as a criminal offence. In addition, the bank should respect customer’s privacy and should not embarrass him in front of others. The failure in the non-payment of the loan amount does not imply that the lender can brand the borrower as a defaulter. Besides, even if the borrower is unable to pay the entire home loan amount, one can reach out to the bank to settle the financial dispute amicably.
Place of contact
Although the borrower has failed to pay the home loan amount, it will be the borrower who decides the place of contact rather the bank. If no such place is decided, a representative from the bank can meet the borrower at the permanent address mentioned in the documents submitted to the bank.
Seizure of the property
According to IBA, seizing the property is the last measure that the bank will resort to and a legal notice should be served to the borrower before such action is initiated. Once the custody of the property is taken, the bank has to ensure complete safety of it and if the borrower pays the dues before the sale of the property, he has full right to take the repossession of the property.
Right to the fair value of the property
If the borrower fails to submit the outstanding amount within the stipulated time period of 60 days, then the bank has right to sell off the property. The bank has to send a notice to the debtor before selling the property specifying the value of the property as assessed by the experts along with details like reserve price, date and time of auction. In any case, if the borrower finds that the property is undervalued then he can express his objection in writing. Alternatively, if the property is sold at a higher price, the bank should pay off the excess amount to the borrower, after realizing the due amount.