Missed your personal loan EMI? Here’s what to do next
Personal loans have emerged as one of the most popular financial tools recently. They allow you to obtain quick credit in times of need, and that too, without pledging any of your assets as collateral. Whether you need funds to tackle a medical emergency, meet your wedding expenses, plan a family vacation, or upgrade your house, you can get an instant personal loan and repay the amount in Equated Monthly Instalments (EMIs) over a pre-determined tenure.
However, sometimes, despite your best intentions, you may miss your personal loan EMI payment and find yourself in a fix. However, it’s essential to know that while missing an EMI payment isn’t ideal, it’s not the end of the world either. In this blog, you will explore the consequences of missing a personal loan payment and the steps you can take to mitigate the impact. Keep reading.
What happens when you miss your personal loan payment?
It’s crucial to note that different lenders, from NBFCs to Small Finance Banks, may have different policies regarding missed loan EMI payments. However, it may result in several repercussions, such as:
Late fees and penalties
Lenders typically impose late fees and financial penalties on borrowers when they miss loan EMI payments. While some lenders charge a flat late fee for each missed EMI, others levy a fixed percentage of the overdue amount. These fees can add up quickly and increase the overall cost of your loan.
Increased interest rates
In some cases, lenders may increase the applicable interest rate on the pending loan amount once the borrower misses an EMI payment. It may further increase your cost of borrowing over the life of the loan.
Negative impact on credit score
One of the most significant consequences of missing loan EMI payments is the negative impact on your credit score. Your credit score, ranging between 300 to 900, is a numerical representation of your creditworthiness and vital in determining your eligibility for future loans and credit cards.
When you miss an EMI payment, it gets reported to credit bureaus, resulting in a lower credit score. A lower credit score may hamper your chances of getting a loan in the future or may lead to higher interest rates.
Legal action and collection calls
Multiple instances of missed EMI payments can prompt the lender to take legal action against you. It could involve hiring a collection agency or initiating legal proceedings. You may start receiving persistent legal letters and collection calls, which may result in stress, anxiety, and other mental health issues.
Damage to your reputation
Apart from damaging your credit score, missing personal loan EMI payments can tarnish your social and professional reputation. Additionally, if you have applied for the loan with a co-applicant or guarantor, the missed EMI payments may impact their reputation as well. They may also receive calls or legal notices from lenders and recovery agencies.
What to do if you have missed your personal loan payment?
If you have missed your personal loan EMI payment, fret not! With timely action, you can minimise the negative consequences. Below are a few steps you can take:
Reach out to your lender
As soon as you realise that you have missed your personal loan EMI payment, the first thing you must do is reach out to your lender. Explain your situation straight up along with the reason why you missed the payment in the first place. Lenders generally appreciate active communication and are always willing to work with their customers to find a solution.
Understand the consequences
Make sure you understand the financial penalties and consequences of missing your personal loan EMI payment. For example, know if your lender will levy any late fee for the missed payment or if it will increase the applicable interest rate on your outstanding loan amount. You can discuss the terms openly with your lender. You can also find this information in the “Terms and Conditions” section of your loan agreement.
Make the payment as soon as possible
If you have missed your loan EMI payment by mistake or negligence, you can complete it as soon as possible. This can help reduce the accumulation of late fees and demonstrate to your lender that you are committed to fulfilling your obligations. In case your lender has already levied the late fees, you can negotiate with them to waive the late payment charges before making the payment.
Discuss alternative options
If you are unable to pay your loan EMI immediately, you can discuss the alternate options with your lender. Several lending institutions assist borrowers who are struggling to pay their loan EMIs. For instance, they may offer them a grace period to make their EMI payments without incurring any extra charges. Some lenders may also increase the loan tenure so that the EMI amount is reduced.
Keep monitoring your credit score
Your credit score may take a hit if you miss your loan EMI payment. However, you can rebuild it gradually by taking the right steps. Once you start paying your EMIs or adhering to a renewed payment schedule, make sure it’s reflected in your credit report. In case of discrepancies, contact the credit bureau.
To sum it up
While a personal loan is a useful tool to meet your short-term financial requirements, you must handle it carefully. Missing your personal loan EMI payment(s) can be a stressful experience and may lead to several negative consequences. However, by staying calm and taking proactive steps, you can minimise the impact. Remember, anyone can face financial challenges, but what’s more important is how you handle them.
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