What Happens if You Can’t Repay Your Bank Loan in UAE

If taking a loan is one side of the story, then paying it off will be another. After availing of the loan, this will be the responsibility of the borrower to pay it off on time without any delay. You will have to understand that what happens if you can’t repay your bank loan in UAE as if you fail to repay the loan amount then it can be lead to many penalties. To understand completely you need to get in touch with the Taskmaster professionals who will guide you completely and save you from any kind of penalties. Here we mentioned some points that you need to consider.

In case the borrower defaults on the loans payments and cannot make any further payments, the action that will be taken varies with the kind of loan that means unsecured and secured loans. A secured loan is a kind of loan where a bank and financial entity grant the loan when an asset is pledged to them as collateral. Car loans, home loans, and more. Come under the category of a secured loan.

Unsecured loans are the kind of loans where the loan holders do not pledge any asset as collateral for the debt. The loan is given on the basis of the monthly income and credit score only. The personal loan falls under the category of unsecured loans.

Whether this is a secure loan or an unsecured loan, if the borrower defaults on their repayments, then the banks and financial institutions in the UAE take legal actions after the fixed level of reminder. In the situation of the secure loan, the legal action can be to utilize the mortgaged property to get back its loan amount. Whereas in the situation of an unsecured loan, the legal action may be distinct.

Consequences if You Can’t Repay a Bank Loan in UAE

1. Affect on Credit Score

A credit report holds the record of all the financial transactions involving a loan taken by a person. This comprises all the repayment details such as the amount and the EMI date which help in determining the credit score of someone. All unpaid dues and overdue payments are recorded in a way that hurts an individual’s credit score. Even a missed payment can result in a drop in your credit score. Hence, an unpaid loan in the UAE could ruin the credit history, making it extremely tough for an individual to get future loans.

2. Impacting Future Borrowing

Every bank and financial institute or private lender examines your credit report and credit score to evaluate the hazards included in giving you a loan. They also do this to understand how financially sustainable you are, all the time you apply for a loan. Having a low credit score because of an unpaid loan in the UAE makes the best loan providers in the UAE hesitant to grant you a loan. Even if a few of them decide to make an exception, they can do of by lending you a small amount, that also at a higher interest rate.

3. Debt Collection Agents

Sometimes banks and financial entities send loan collection agents for debt recovery if the default tenure of the unpaid loan in the UAE has exceeded a tenure of ninety days. The bank issued a notice providing the loan holder a possibility to pay it off within sixty days otherwise the loan account would be tagged as an NPA. This is suggestable to prevent matters from taking out of hand as this can be extremely stressful.

4. Penalty Charges

Additional fines and charges may be levied on the loan holder for non-payment or the late payment of installments. If the loan holder makes the installment after the due date or within the grace duration, they would also have to keep extra late payment charges. Further delay in repayment would mark them as a defaulter and they may be charged additionally on unpaid bank loans in UAE.

5. Legal Actions

The property pledged in the case of a secured loan would be auctioned. The loan holder is provided a fixed tenure to repay the loan otherwise the mortgaged property would be put up for auction. Even throughout the auction, the loan holder can clear the amount of the loan and take its property back, otherwise the bank would sell the property and reimburse it with the excellent loan amount.

Under the unsecured loan, legal action may be significant. Firstly, while sanctioning the loan, the borrower has to give a signed blank cheque to the bank. if the loan holder fails to make further loan EMIs, the lender would deposit the cheque and if there is no balance in its account, the loan holder would be arrested for a cheque bounce case along with a fine and imprisonment. The loan holder would have to serve the jail term and repay the loan at any cost. The borrower cannot leave the nation till the loan is cleared.

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