What would happen if you don't repay the Mudra loan or the CGTMSE?

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If you fail to pay the loan withdrawn under the MUDRA or CGTMSE scheme within the stipulated time (7 years in case of a MUDRA loan), the financial institution will take steps according to their framed repayment policy. The authorities explain their terms and conditions to a borrower before disbursing a loan.

If you do not pay a loan before the deadline, the authorities first send you a notice directing you to repay it as soon as possible.

In case you still do not initiate the repayment, the financial institution will further take steps to recover the money.

Non-repayment of business loans have serious implications like –

  • Negative impact on CIBIL score.
  • Difficulty of availing business loans in future.
  • Difficulty of availing other financial products such as personal loans, credit cards, etc.
  • Bring down the borrowers’ creditworthiness and market reputation.

Borrowers who have faced difficulties in repayment of business loans availed under government schemes such as MUDRA loan or the CGTMSE scheme, may be unable to avail further such schemes.

They can opt for business loans provided by NBFCs against minimal documentation and eligibility requirements at affordable rates of interest. They can use the funds to consolidate their existing debts which will also improve their credit score over time.