The extent of strictness adopted by banks in loan recovery mechanism differs from one loan type to another. In some cases, the bank intimates the borrower of his default immediately while in some they may hold it for 3-4 months.
In case of a home loan, the bank takes action against the borrower in 3-4 months, while a car loan default would be intimated to the borrower in the first month itself. In case of a personal loan, the action taken by the bank could be much earlier.
Action against unsecured loans is taken earlier than that on secured loans. This is because the risk exposure of banks is more in case of unsecured loans. In case of secured loans also, those loans which have easily liquefiable collaterals associated with them are usually given more relaxation by lenders.
It is thus evident that several steps are being taken in the interest of the borrower to protect him from undue harassment from recovery agents. But it is imperative that repaying a loan taken is the duty of the borrower and banks have the due right to recover their loans. Also the relaxations and protection offered to borrower should not be misused in any form or manner.
Some tips to the borrower:
1. Never run from the bank. In such situations, bank is the best savior and running from it can make matters worse.
2.Talk to the bank and see if they can increase the tenor of your loan. This will reduce the EMI.
3.Also, see if other banks are ready to refinance your loan at lower rates.
4.If no other option works and you have defaulted on many loans, go for debt consolidation.
5.Make a tight budget and stick to it. Find out any available liquid or nearly liquid asset which can be used at the immediate hour to pay back EMIs.