Defaulting on the repayment of loan is rather worrisome, the biggest worry being, the seizing of assets. However, what a loan borrower doesn’t know usually is that car loan defaulters have some basic rights that they can exercise, which cannot be overlooked by lenders.
Let’s find out about them:
Right to fair valuation of assets
In case you have defaulted on the repayment of loan and it reaches a point of seizing your assets, you should make sure there is a fair valuation of your assets. Usually, during the loan default, the value of an asset is much higher than the repayment amount. In such cases, RBI has set guidelines for the valuation of collaterals. Before they reach a point of recovering dues to loan default, the lender is supposed to give due notice to the borrower and all details.
If the lender feels their assets have been unfairly valued, they can file a complaint with the Debt Recovery Tribunal.
Right to adequate notice
If you have been continually defaulting on your car loan, the lender has a right to take appropriate action to recover their loan amount. However, it has to be done in an orderly fashion. One must remember that it is not a criminal offense to default on your loan. It is a lender’s responsibility to give adequate notice to the borrower before taking any extreme action. Usually, when a lender decides on paying certain car loan rates, they assume they’d be able to pay it off.
However, if not, the lender should send at least a 60-day notice period to the borrower to make the payment. If the borrower is unable to pay it in the stipulated timeline, the bank or the lender is allowed to sell the asset. But to do that as well, the lender should give at least a 30-day notice to the borrower.
Right to balance proceeds
As per your car loan eligibility, the lender is allowed to sell assets in the extreme case of non-payment of a car loan. However, if the assets auctioned by lenders are sold at a rate higher than the amount that has to be recovered, the balance amount is the right of the borrower and should be paid to them in full.
The borrower has the right to monitor the auction process and can approach the Debt Recovery Tribunal in case they feel they’re being cheated by the lender. Especially, if the asset sale has successfully fulfilled the repayment of loan and the remaining amount has not reached the borrower.
Pro Tip: If you are a borrower, you should not forget that you have a right to humane treatment as well. If you ever feel that during the recovery of the loan default you’re mistreated in any way, you can make an official complaint. The lenders or banks in no way can violate norms of decency and civil behaviour. The borrower themselves or their family members can approach the banking ombudsman offices in such cases of car loan recovery process.
In conclusion, you should know that you have some basic human rights despite a loan default. Never let the lender treat you unfairly or unjustly and make sure you are treated correctly if you’re ever in the repayment of loan recovery process.