Default on a personal loan or credit card? These are your rights!


Nobody plans to default on their personal loan or credit card payment. In fact, this is some individuals’ worst nightmare.

Life, however, doesn’t always go according to plan. An event like job loss, medical expenses, or other necessary living expenses can cause you to default. The bank will initially reach out to you directly and remind you of the payments you have missed. Eventually, collection agents will start reaching out for the same.

Many collection agencies take the approach of constantly calling a customer to pressure them into paying any amount they can afford. Some take on the approach of harassing borrowers into paying.

In either case, being a borrower in default is difficult. The one thing that can help you in this tricky situation is knowing your rights as a borrower who has defaulted on a personal loan or credit card.

Can credit card debt affect credit score?

As mentioned above, Credit card debt can definitely impact your credit score. From applying for a credit card to paying off the credit card bills, every decision you take will either increase or decrease your credit score.

To stay financially healthy, you must understand that simple good finance habits can save you from a plummeting credit score.

1. Right To Adequate Notice

A borrower is classified as a Non-Performing Asset (NPA) by a bank within 90 days of default. In the time period leading up to the 90 days, the bank must notify the borrower of the action they are planning to take against them.

2. Right To Be Heard

Every borrower has the right to object to any legal notices presented by the lending institution. You can raise objections to these notices with an authorized officer. The officer will then either sustain or reject the borrower’s objections post investigation.

In case the officer rejects the borrower’s objections, they will have to provide valid reasoning for the same.

3. Right To Humane Treatment

Horrific cases of collection agents’ abuse pop up across India every day. Most go unheard but some are cruel enough to make National News. To curb the cruelty that borrowers face when they’re unable to pay back the money they owe, the RBI has laid strict guidelines to govern collection activities.

Collection agents are not allowed to contact borrowers before 8:00 AM or past 7:00 PM. They can also not visit the borrower’s home or office without permission.

To further protect borrowers from the cruelty that some collection agents can indulge in, the RBI has also barred certain lenders from outsourcing collection activities.

4. Right To Privacy

A bank, lending institution, or collection agency cannot share sensitive information of a borrower without their consent. This includes identifying information such as address, phone number, etc. and information about their debt.

While the lender has the right to reach out to a borrower for loan repayments, they need to treat the borrower with dignity. Even when a borrower is going through genuine financial hardships, they can repay their debt if they have the intent to pay. All you need is to find the right option as per your affordability, financial hardships and goals.

FREED Debt counsellors help borrowers assess their debt and financial situation to suggest the right path to a debt-free future. If you’re stuck with unmanageable debt, help is just a click away.

Need to talk to a Debt Counsellor?
Have more questions? Call us at