Took loan at higher rate of interest

Querist : Anonymous (Querist) 03 July 2020 This query is : Resolved
Sir,
My Dad borrowed some fund from a person.
The person charges high rate of interest.
My Dad regularly paid the interest. But looking towards calculation, the amount of interest paid by my dad has exceeded twice the principle amount. Still principal amounts stands to be outstanding. And with this due regards he creates enormous pressure.

All of the above he wants Gold as security and also eyes to the properties.

Kindly suggest us what legal step should we take?
My Dad is in full depression and is unable to think much

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Quick Summary

This discussion addresses a concerning situation where a father has taken a loan with an extremely high interest rate, leading to him paying double the principal amount while still owing the original sum. Experts suggest exploring legal avenues, potentially refinancing with a nationalised bank for better terms, or selling property to clear the debt. It's crucial to ensure all securities and documents are returned upon repayment and to investigate if the lender is licensed and adhering to interest rate regulations, especially considering specific state laws like the Kerala Prohibition of Charging Exorbitant Interest Act, 2012.

Rajendra K Goyal (Expert) 03 July 2020
For what purpose the loan was taken?

What was the amount and rate of Interest?

What was the repayment terms?

What security / documents were given when loan taken?

Rajendra K Goyal (Expert) 03 July 2020
Your father may contact some Nationalized Bank and can take reverse mortgage loan / gold loan and liquidate the present loan. Rate of interest of Bank is quite low with easy terms of payment.

Otherwise your father can sell his part of property and get rid of this high rate loan.

kavksatyanarayana (Expert) 03 July 2020
Yes. Is there any written document or a promissory note for the loan taken by your father? At least what are the oral conditions/terms? It is better to take a reverse mortgage loan from a Nationalized Bank as advised by learned expert Mr. K. Rejendra Goyal sir. or sell the property and to clear the loan by a check or other proof for it.

Rajendra K Goyal (Expert) 04 July 2020
In case clearance of loan is preferred, make it sure to get back the security / documents / blank, undated cheque / mortgage paper/ pledged articles, if any, given to the person at the time of taking loan. Do not believe on his oral promise that he would destroy such proof himself. Better keep some evidence / witness of such refund.

Dr J C Vashista (Expert) 04 July 2020
Very well analysed, opined and advised by expert Mr. Rajendra K Goyal and Mr. Kavksatyanarayana, I fully agree and appreciate.

Dr J C Vashista (Expert) 04 July 2020
Whether the financier of your father is a money lender and has a licence for the purpose?
Has the financier of your father advanced some more loans to borrowers other than your father ?
Has any complaint been lodged against the money lender for charging interest at exorbitant rates, which are not in confirmity with Interest Rates Act, 1978 ?

P. Venu (Expert) 04 July 2020
What is the rate of interest? Is there any written documents to substantiate the transactions and the rate of interest?

K Rajasekharan (Expert) 10 July 2020
No law in India, it seems, prohibits charging of exorbitant interest in general on any loan, except that of the banking and financial institutions.

But Kerala state has enacted a state specific laws to address this issue. The law is called Kerala prohibition of charging exorbitant interest act 2012.

If your state has any such law then it would make it easier for you to deal with the issue of charging high interest rate on loan.

Kerala law stipulates that no person shall charge exorbitant interest, on any loan advance by him, exceeding two percent above the maximum rate of interest charged by commercial banks on loans granted by them.

Rajendra K Goyal (Expert) 10 July 2020
Even Banks charges very high and away from justification rate of interest in case of credit card issued / managed / promoted by them when there is overdues.

P. Venu (Expert) 10 July 2020
To my knowledge, not only Kerala, but many States have enacted law prohibiting exorbitant rates of interest.

Guest (Expert) 10 July 2020
Well advised by Learned Advocates Mr.K.Rajasekharan and Mr. Rajendra K Goyal . Agree with them.

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