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The number of personal loan defaulters are raising now. Why the calculated personal loan fails. How to avoid listed in CIBIL, if we are about to default our personal loan. Few hypothesis about personal loan defaulting are discussed here.

Personal loan should not be defaulted. It is given against the salary. It is given, based on the standard and secured periodical income. It should be paid promptly, because it has a backup of salary. So it has no scope for defaulting. But it is defaulted.

Personal Loan Defaulting can be grouped into several types:
Willful defaulting, Excess Liability, Health Reason, and Socio-Economic Changes.

Willful defaulting is determined. The person who gets personal loan already decided to cheat. He may simultaneously get loan from several banks and abscond.

Excess liability is committing more than what we are able to liable. We know our commitment to our present loan, but we accidentally or voluntarily engage in other borrowings, and it takes the high priority than the personal loan. So we pay to other borrowings and miss the EMI of PL.

Health Reasons.
It is like we are not able to work or go to office due to health reasons. We may be bedridden for a few months. This is unintentional and accidental.

In this sick/bedridden period, we are not able to pay the EMI of our loan, because we have no income or we are not getting our salary, which we have shown as a proof/security for getting the loan.

Socio-Economic changes.
The best example is software industry. The software employees were getting sky scrapping salary. They got personal loan based on their salary. During the recession, many lost their jobs and many got negative hike, got their salary reduced. This is not their intention, or they do not plan it. It is happening not because of them. So due to the changes in socio-economic changes, IT employees may be defaulting their personal loan.

Willful defaulting and Excess liability are intentional. Loaner could have avoided defaulting but he consciously decided or forced to ignore the EMI. This type of willful defaulters should be listed in CIBIL.

How a willful defaulter is identified?

Change the Salary Account.
I keep a salary account in a bank. Say, Indian Bank. I got a personal loan from my bank based on my salary credited there. So, bank can claim its EMI from my salary automatically, when salary is credited by my company.

After getting the loan, I changed my salary account to some other bank. Say, ICICI. So my salary is credited to ICICI. Indian bank can not deduct its EMI from my salary automatically now. My salary is not going there. Either I have to pay to Indian bank separately, otherwise, it can not claim it. I am defaulting intentionally.

Taking the Full salary through ATM.
Every 1st, my salary is credited into my account by 10AM in the morning. But my EMI is not deducted immediately. The bank has to run the process/software to deduct the EMI at the End of Day, say after 6PM on the same day(1st).

In between 10AM to 6PM, I can withdraw my salary through ATM(s). When the banking software runs the EOD process, nothing will be left in my account at the time. I should have leave the EMI amount in my account, but I don't. I withdraw full salary. This is willful defaulting.

Many banks deduct EMI from the salary account in an EOD batch process. They have the banking software, which deducts the EMI from the salary account at the EOD process. Recently Banks are changing this process to deduct their EMI immediately after salary being credited.

Many banks may deal the Defaulters due to Health reason and Socio-Economic changes decently. They may not inform or list in CIBIL. Banks may consider for re-phasing in this cases.

If we get a re-phasing, we may avoid being listed in CIBIL for defaulting personal loan. Rephasing is like extending the EMI period.