Here’s why you shouldn’t miss repaying even a single EMI on a personal loan

Posted on Monday, April 29th, 2024 | By IndusInd Bank

Personal loans are quick and easy-to-access financing options available today to meet personal expenses. Timely loan repayment of these loans is crucial for preserving creditworthiness and financial well-being. Failing to make a scheduled EMI payment due to various reasons, such as lack of funds, oversight, or financial difficulties, can result in adverse consequences. This includes increased interest, late fees, lower credit scores, and potential legal action.

What is EMI payment?

Equated Monthly Installment or EMI is the fixed amount of loan (Inclusive of both principal and interest) that the borrower pays back to the lender every month on a specific date. The amount of EMI remains constant over a loan tenure which can be calculated using a personal loan EMI calculator available online.

It is quite easy to avail of personal loans via a loan application online with minimal documentation requirements and an instant approval process. However, it is also important to maintain a healthy repayment practice to avoid the consequences.

Also Read: The Convenience of Instant Loans: A Guide to Using Banking Apps for Quick Funds

The following are the consequences of missing repayments of an EMI on a personal loan:

1. Late payment charges:
   Lenders typically levy late payment charges if you miss paying even one EMI on a personal loan on a scheduled date. The amount of late payment charges or fees may vary from lender to lender depending on the terms and conditions of the personal loan you have availed. Hence, it is extremely essential to keep a check on EMI payments scheduled for your personal loan to avoid late payment fees.
2. Elevated interest cost:
   Missing out on even one personal loan EMI payment can elevate the interest cost for the rest of the loan tenure. When you miss an EMI payment, the outstanding amount continues to accrue interest till you make a payment as the interest is charged on the unpaid loan balance. It is also important to note that the personal loan interest rates compound periodically resulting in more interest costs when EMI is missed. Along with the penalty and additional interest cost, it might also result in extended loan tenure when you miss a personal loan EMI payment.
   
   Some of the lenders may even increase the personal loan interest rates when you fail to make an EMI payment on time. You can use the personal loan EMI calculator available online to calculate the revised EMI in case of an interest rate hike.
3. Adverse impact on credit score:
   Late payment or non-payment of EMI can hurt your credit score, which is mainly used as an indicator of your creditworthiness. Payment history has a significant impact on credit score as a missed payment indicates your inability to meet the financial obligations on time. Lenders can perceive missed payments as signs of financial irresponsibility or instability. This can result in a lower credit score making it difficult for you to secure loans in the future on favourable terms. As the credit score lowers, your financial reputation also gets affected.
4. Legal action:
   A single late payment or a missed payment of a personal loan EMI may not lead to legal action. However, multiple missed payments of personal loan EMIs can lead to legal action for recovery of the loan. Lenders can initiate legal action through recovery agents, seize assets, or through a lawsuit depending on the terms and conditions of the loan agreement. Along with ensuring timely repayment of the loan, it is also important to read the terms and conditions thoroughly before placing a loan application online.

Conclusion

In conclusion, it is important to choose a comfortable loan repayment schedule and prioritise each EMI payment on a personal loan to avoid all the negative consequences. You can contact the lender and discuss the issue in case of any trouble in making the payments to look for alternative options like loan restructuring without facing the consequences.

If you are looking for an instant personal loan, IndusInd Bank offers online personal loans at attractive interest rates with minimal documentation. Apply now!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and 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.