Missing a Personal Loan EMI payment can cause a range of issues, from penalties to a damaged credit score. Whether it's a one-time slip or a recurring problem, understanding the implications of a missed Personal Loan EMI is important.
Defaults of missed EMI payments
Personal Loan EMI miss can lead to either a major or minor default.
Major default
A major default occurs if your EMI remains unpaid for more than 90 days. This results in significant penalties and is reflected in your credit report, leading to a lower credit score and reduced chances of obtaining future loans or credit cards. Additionally, the lender may classify your loan as a non-performing asset, further complicating your financial standing.
Minor default
A minor default happens when you miss an EMI but repay the dues within 90 days. While the penalties are smaller, it can still affect your credit score. Fortunately, prompt repayment can minimise the impact and help restore your financial health quickly.
Repercussions if Personal Loan EMI payment is missed
Penalty charges: Late fees are levied, increasing your total payable amount.
- Interest accrual: Unpaid EMIs lead to additional interest, inflating your loan.
- Credit score drop: Each missed payment is reported to credit bureaus, lowering your score.
- Difficulty in getting new loans: A low score can hinder future loan approvals or force you to accept higher interest rates.
- Legal consequences: Continued defaults may lead to legal action.
- Stressful recovery methods: Collection agents may be involved to recover missed payments.
How to avoid default circumstances
Set up auto-debit: Automate payments to avoid missing due dates.
- Create an emergency fund: Keep aside funds to cover EMIs during financial hardships.
- Consider loan restructuring: If you are struggling with your current EMI, contact your lender to explore refinancing options or restructuring the loan for a lower monthly payment.
- Communicate with your lender: If you know you might miss an EMI, talk to your lender for possible relief options.
- Pay extra when possible: Paying more than your EMI can reduce the overall loan burden and avoid future missed payments.
Conclusion
Managing your Personal Loan EMIs effectively helps you avoid penalties, increased interest, and damage to your credit score. With careful financial planning and timely payments, you can easily prevent these challenges.
Opting for a well-structured loan, like the Axis Bank Personal Loan, makes repayment even smoother. With its simple online application, flexible tenure options, and no collateral requirement, managing your loan becomes more convenient.
Also Read: How can you get a Personal Loan online with 6 easy steps?
FAQs
What happens if EMI is not paid for 3 months?
If you miss EMI payments for three months, your loan may be classified as a non-performing asset (NPA), and legal proceedings may begin.
Are there any charges if EMI is not paid?
Yes, penalty fees are applied along with increased interest for each missed EMI.
Can I pay my EMI after the due date?
Yes, but late fees and additional interest will be added to your outstanding loan balance.
Do I get a legal notice if I miss my EMI?
Yes, after repeated defaults, lenders may issue a legal notice as part of recovery efforts.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
