all is not lost! It is very possible, with some discipline, to rectify the situation. PersonalFN will lay out some simple steps that you can take if you ever find yourself or a friend or loved one in this situation.
Step 1: Don't Panic
This is not a rare situation. Banks have customers who default on payments all the time.
It might feel like you are alone, but you aren't. There's no need to feel like you have a great weight on your shoulders and you have to bear it by yourself. In fact, your bank will be the first entity willing to help you. Defaulting on your loan, even if it is a home loan, is not the end of the road.
Step 2: Get Your Papers in Order and Call Your Lender
Create a file containing all your past EMI payment details, notices sent to you by the bank if any, details of the loan i.e. date of taking the loan, tenure, interest rate, EMI amount and so forth. Have this handy when you talk to your lender. Tell your lender the genuine reason(s) that have rendered you unable to pay the EMIs, tell them that you would like to pay your loan back as soon as you can, and ask them what their options are.
You will most likely get an initial automated response that reads something like this:
We would like to work with you on the issue of your loan repayment - request you to write to us at email@example.com with your loan account number, contact details and the reference id ABCD00001111. A bank representative shall contact you as soon as we receive this information.
Regards, Customer Assistance, ABCD Bank"
Once you revert with the necessary details, you will get a call from your bank and can set up a meeting to calmly and rationally discuss your options.
Step 3: Consider Your Options, in Dialogue with Your Lender
Can the bank repossess your asset i.e. your car or your home? Legally, yes they can. But there are a couple of reasons why you don't have to necessarily worry about this.
Firstly, the repossession procedure in India (and in fact elsewhere in the world as well) is very lengthy and there are steps along the way where you and the bank can work together to come to a satisfactory deal.
If you have paid your EMIs on time until now, the bank knows you as a genuine borrower, and will take this into consideration when working together with you to find a mutually feasible solution. 'Genuine intent' to repay is the single largest thing that will work in your favour. Be sure to make it very clear to your bank that you do intend to repay and would like to work together to find a solution.
Genuine reasons that banks understand are loss of a job, illness, or an accident that may render you unable to work. You might also have multiple loans, and find yourself in too much debt to handle.
Secondly, the bank doesn't want to repossess your assets, it wants you to pay the money owed, or at least most or part of it. If you default, the bank's NPA ratio (Non Performing Assets) goes up. This reflects badly on the bank. Also, they lose out on the money you would have paid them. So the bank will much prefer to cut you a deal.