How To Fight The Dark Side of Debt Recovery And Emerge Successful
Most of us who borrow money are not cheats who intend to defraud the lender by not repaying.
The banking and financial system runs on trust and what is calla ed prudent assessment of risk before a loan is given.
Recently, this blog writer was witness to a case of the borrower failing to repay the loan after paying EMIs for a reasonable period of time – essentially, the period when the bank has recovered most of its interest on a loan.
The person in question suffered a bout of Covid, during which the business suffered, and the loan EMI defaults started.
The borrower tried to settle the loan amount, but the bank refused to talk about it. They were firm on receiving the whole sum.
And then outsourced recovery agents of the bank started their “follow up”.
It started with aggressive calls and acts of covert humiliation at home, in front of neighbours, calls to the borrower’s contacts and telephone calls at varying times of the day and night.
The borrower was a wreck. Endless nights without sleep and constant pressure really messed with their health, sparking intense waves of panic.
RBI Code of Conduct, Soon
Recently, the Reserve Bank of India (RBI) issued a draft paper for discussion on managing risks and code of conduct for outsourced financial services.
Among other things, up for discussion, the RBI has proposed that banks and their recovery agents must not intimidate, harass, or engage in any form of verbal or physical mistreatment, during debt collection.
The RBI has said recovery agents must not act in ways meant to publicly humiliate or invade the privacy of debtors, their guarantors, family, friends, or referees.
The banking regulator also said inappropriate messages via mobile or social media, misleading claims, threatening or anonymous calls, and excessive contact with the borrower or guarantor must be prohibited.
The RBI has also proposed that loan recovery agents must contact the borrower or guarantor only between 8:00 a.m. They should only reach out to the borrower or guarantor from 8:00 a.m. to 7:00 p.m., with no exceptions.
Approach Debt Counsellors
If you are struggling to pay off a debt that is beyond your ability, then credit counselling centres provide you with specific services to help you emerge from the crisis.
Do not be thin-skinned about it. Don't sweat it, either.
Reaching out for expert guidance is totally cool.
Debt counsellors can offer you some services to ease your debt repayment woes.
Here are the services that these centres provide to debt-laden customers.
Counselling Services: The counsellor first analyses your financial condition, debt structure, and causes for the debt trap.
Then they will advise you about possible repayment options and suggest you to avail the best one that fits into your budget.
Not only this, they even set a budget for you, keep a limit on the expenses and offer you advice regarding the optimum utilization of your available finances.
Negotiation with the lender: These counsellors can also negotiate with the lenders on your behalf.
They negotiate to reduce interest rate, waive late payment fines, work out a debt restructuring plan or arrive at a settlement amount.
The counsellors will charge fees for this service, and the amount for the same will depend upon the outstanding amount and the details of your case.
How to approach debt counselling
The important thing to remember while speaking to your debt counsellor is to state your facts.
Reveal all the details, which led you to the debt trap to the credit counsellor, and get details of the fees they will charge you for their services.
Most of them work on a token fee and a percentage of the settlement amount. This could, though, vary.
Look At Ways To Cut Debt
The approach of young Indians to debt is changing.
For many years, India was cautious about borrowing money.
However, with changing spending habits and the easy availability of credit cards and loans, many now borrow without considering the repercussions.
If you find yourself in significant debt, financial experts typically recommend clearing high-interest loans first, as credit card and personal loans usually carry the highest interest rates.
By prioritising these, you can reduce the overall interest you pay.