What Happens if Personal Loan EMI is Not Paid?

I found a few people going through financial difficulties, who asked me what happens if personal loan EMI is not paid. Missing your loan EMI triggers a series of escalating repercussions, not just isolated fees, but consequences that can seriously impact your financial health.

What will Happen If Personal Loan EMI Not Paid?

• Initially, the bank gives you a grace period and sends reminders through SMS, calls, or emails. 

• If the EMI remains unpaid, late payment fees generally around 1 to 2% of the missed EMI are levied, along with increased interest on the outstanding amount.

• Credit bureaus are informed of the missed payment, resulting in an immediate drop in your credit score, potentially by 50 to 70 points for even a single default, and creating a negative mark on your credit report.

• If the EMI is missed for 90 days or more, the loan may be declared a Non-Performing Asset (NPA), severely damaging your creditworthiness.

• The bank could then initiate recovery actions, including issuing legal notices, deploying recovery agents, or even initiating legal proceedings to recover dues.

I hope you get an idea of what happens if personal loan EMI is missed.

Hey there! It’s better that you try to pay your EMIs on time, because missing out on your loan repayment can lead to many challenges in the future. As a financial advisor, let me tell you what happens if personal loan EMI is not paid. First, you can be penalised by your lender and your CIBIL score will also get affected by this. Your lender may also charge you 1% to 2% higher interest rate for every missed EMI.

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What Happens if Personal Loan EMI is Missed?

I’ve had clients asking this question, and I always advise them to keep a check on their repayment schedule, because missing out on paying EMIs will affect your credit history and overall financial health. And, if this continues, your bank may also ban you from borrowing money in the future. I’m sure you won't want that. 

Here’s what will happen if personal loan EMI not paid on time:

1. It will affect your credit score. I don’t think I need to emphasise more on this as people have already mentioned it in the previous answers. 

2. As I mentioned above, not paying EMIs can also lead to additional charges or penalties. The interest rate will keep getting higher at every delay or unpaid EMI. This will further lead to financial burden.

3. You will also face difficulty in getting new loans in the future, because your credit score will already have a negative impact due to this and lenders will find it difficult to trust you with the loan.

4. If it becomes a cycle and you continue to miss your EMI, your lender can take legal action too.

So, these are all the negative consequences that can happen due to delayed or missed EMIs. If you take my suggestion, I would say create an emergency fund where you keep aside money to cover EMIs during a financial crisis. You can also talk to your lender if you’re having trouble paying the EMI and discuss any possible relief options.

Hope it helps.

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Hi Animesh. As a loan officer at a private bank, I can tell you what happens if personal loan EMI is not paid. Four major things occur upon delayed or nonpayment of EMIs. Upon missing out on your loan EMI payment, the lender can file legal action against you. The second that will happen is that it will affect your finances due to an increase in debt. I’ll share the rest in the next section.

What will Happen if Personal Loan EMI Not Paid

Here are some consequences of non-payment of loan EMIs in India:

1. The major hit will be taken by your credit score as delayed or nonpayment reflected in your credit report. It will present you as an unfit applicant for future loans. It reduces creditworthiness.

2. Banks and NBFCs have a strict system of levying additional interest upon delayed and nonpayment of loan EMIs. This will lead to an increase in your overall loan cost. The interest will keep on compounding with every missed/delayed payment.

So, how can you avoid these consequences associated with defaulting on your EMIs? Let me tell you below.

1. Talk to your lender and explore options to reduce the EMI by increasing the tenure.

2. You can consider taking a top-up loan to manage finances, given you’ve not defaulted on EMI payments already.

This is all I have to share with you regarding what happens if personal loan emi is missed. I hope this turns out to be useful for you.

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Some related information:

How to Pay Extra EMI for Personal Loan?

I took out a personal loan last year and always make sure to pay them on time. However, just out of curiosity, I wanted to know what happens if personal loan EMI is not paid on time. I started doing some research and learned that one of the biggest problems that raises is the dip in credit scores. Not paying EMIs on time affects your credit score by a lot. 

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What Happens if Personal Loan EMI is Missed?

As I mentioned above, your credit score is affected when you don’t pay your EMIs on time. When that happens, lenders think you are not creditworthy and are less likely to provide you with a loan. Here are a few more things that I have learned.

Additional Interests and Penalties

Not paying your EMI on time quite results in lenders penalising you with additional interest. This‌ increases the overall cost of your loan. Delayed payment keeps on adding to this amount, thus increasing your financial strain.

Health Impact

Another result of missed EMI is debt traps. These may look like nothing at the beginning, but over time, it affects your financial well-being. This can lead to stress, which can affect your mental and physical health.

Legal Action

Repetitive missing EMIs can lead to lenders taking legal action against you. This could also lead to court proceedings. 

This is what will happen if personal loan EMI not paid on time. And that is all that I have learned. I hope this helps.