Introduction: In India, failing to repay personal loans can have severe consequences, ranging from increased financial liabilities to a damaged credit score. Potential legal actions could also follow, making it crucial for borrowers to understand these repercussions.

Higher Debt Burden: Defaulting on Equated Monthly Installments (EMI) escalates the borrower's liabilities, requiring them to settle the full outstanding amount, including penalties. This amplified financial stress can become difficult to manage.

Credit Score Damage: Maintaining a good credit score is essential for future borrowing opportunities. Failing to meet EMI obligations can cause a significant drop in credit score, often by 50-70 points, severely impacting future borrowing potential.

Legal Action: The level of legal action varies and depends on the EMI default duration. While some missed payments might be overlooked, defaults lasting over 180 days can lead lenders to initiate legal procedures under the Negotiable Instruments Act of 1881. Being identified as a wilful defaulter may also lead to criminal charges under the Indian Penal Code.

Difficulty in Obtaining New Loans: Recorded in credit reports, EMI defaults can make acquiring new loans challenging. Lenders may mark credit status as "written-off" if defaults are unresolved, damaging credit history and hindering future loan prospects.

Borrower Rights and Protections: Borrowers retain rights such as receiving proper notices before recovery actions, determining contact terms with lenders, being treated with respect and privacy, and obtaining fair asset valuation during repossession. Awareness of these rights is crucial to avoid exploitation.

Steps to Take When Facing Default: Addressing default situations proactively is key. Actions might include budgeting, informing lenders of circumstances, requesting EMI deferment, extending loan tenure, seeking asset liquidation, getting help from family, negotiating settlement terms, or comprehending defaults on secured loans.

Impact on Credit Score: Unpaid loans becoming non-performing assets adversely impact credit history, causing lenders to report to credit bureaus and significantly lowering credit scores.

Conclusion: Given the rising delinquency rates in India, it’s imperative for borrowers to ensure borrowings align with their financial capabilities. Communicating with lenders promptly can provide alternative payment solutions in emergencies. Selecting lenders with flexible terms is essential to avoid defaults, and researching loan options on platforms like MoneyView offers hassle-free access to reasonably priced loans.