What Can Borrowers Do If Their Bank Is In A Crisis?
The ongoing non-banking finance companies (NBFC) crisis is giving sleepless nights to many borrowers. Equally worried are the consumers whose banks have courted controversies and are struggling to survive over their involvement in large-scale financial frauds. Here are some pointers that borrowers should consider and act on if they are victims of this crisis.
Should you stop paying EMIs?
While this is the first thought that crosses the mind of a worried borrower, it isn’t a wise decision. If you stop paying EMIs, your credit history would show it as a default from your side, jeopardising your creditworthiness. Stopping EMI payments on a loan taken through a tripartite agreement with the builder and the bank, will amount to dishonoring your obligations towards the developer.
The borrower must also not completely discount the possibility of the bank’s revival through government help. If all the borrowers stop paying EMIs at the same time, the crisis may get far more serious.
Noteworthy: The terms of the builder- buyer agreement continue to be in effect despite the bank’s financial troubles. Thus, the borrower must continue to honour his part of the deal in all circumstances.
Should you switch your home loan?
If you think the chances of your lender coming out of the current crisis are slim to none, switching your home loan would be the viable option. When you look for a new borrower, do ensure you sign up with a lender who is financially healthy even if the home loan interest rate is not as affordable.
Noteworthy: Your new lender would factor in how you reacted to the crisis involving your previous lender and that is why it makes sense to continue paying your EMI.
Should you wait and watch?
Take an informed decision with regards to changing from your troubled lender to another one. In case a resolution plan is being worked out to pull your bank out of troubled waters, waiting for things to normalise would be the best policy.
Noteworthy: In case a new company takes over the troubled lender (which is often the case), the old arrangement would continue.