There are numerous unknowns in life. It is impossible to forecast when unanticipated expenses will arise. Not only would such unexpected costs wreck your monthly budget, but you can also unintentionally skip an EMI payment on a personal loan. The sooner you take action, whether it’s because you don’t have enough money to pay the EMI or because you made a mistake, the better. A personal loan EMI calculator (PL EMI calculator) will make calculating the EMI due simple. Your financial picture will suffer if you fall behind on your personal loan payments. Let’s investigate how:
What Happens When You Miss Your Personal Loan EMI?
If your bank account has insufficient funds on EMI due date, the amount cannot be deducted from your account. In such a case, one of these 3 things could occur:
- You could receive an email from the lending institution about the failed EMI payment
- They may call you reminding you to pay the dues
- Additional time would be given to pay the EMI.
- If you fail to pay the EMI even for an extended period, the lending institution will levy Personal Loan charges for the late payment.
- If you miss the Personal Loan EMI for 3 months consecutively, you would be considered a defaulter. The lender may initiate legal proceedings against you for non-repayment of the loan dues.
- Here’s how a missed EMI payment on a Personal Loan would impact you:
Pay Penalty
Most lending institutions include a penalty clause in the loan agreement in case of a payment default. If you have missed your EMI or have delayed the payment, be ready to shell out 1% to 2% extra on the EMI due as a penalty. By defaulting or delaying the EMI, you are incurring more costs, which is not in your best interest?
CIBIL Credit Score
Apart from the penalty, a long-term consequence of missing out on your Personal Loan EMI is that your CIBIL score gets lowered. A CIBIL score of 750 or more is desired by most lending institutions. A single default in EMI will lower your credit score by 50 to 70 points. For you as a borrower, it means lending institutions will not sanction your loans easily in the future and you may have to pay a higher interest rate. In short, missing your EMI means costly loans in the future.
Get Labelled as ‘Risky Borrower’
Any financial institution will lend money to borrowers only when they are assured of timely repayment. For this, they check your borrowing and repayment history by going through your CIBIL credit report. If you have defaulted, a record of the default gets mentioned in your credit report. Lenders take these comments seriously and would term you as a ‘risky borrower’ even though your credit score may be over 750. In most cases, Personal Loan applications get rejected because of the credit report. A comment in your credit report would mean trouble getting loans in the future and if you do get a loan, it would be not on the best terms.
Legal Proceedings
If you continue to default on the EMI payments despite the notice and reminders, the lending institution may start legal proceedings against you. It is certainly not in your best interests as it would cause undue stress for you and your family. The lending institution may resort to recovery agents, and such a situation is best avoided.
Precautionary Steps to Avoid Missing Personal Loan EMI
Before taking a Personal Loan, check your monthly EMI using the PL EMI calculator. Most lenders have this calculator online to facilitate loan aspirants?
Ensure that you have a buffer between what you can afford to repay and your actual EMI. This will help in case you are faced with emergency expenses.
Set aside some of your income every month towards an emergency fund that can be used when you’re faced with unforeseen circumstances?
Also Read :- Easy Financial Planning with a Personal Loan EMI Calculator
What to Do if You Have Missed Your Personal Loan EMI?
If you are in an uncomfortable position of having missed the EMI payment, here is what you can do
Talk to Your Loan officer
Proactively reach out to the loan officer and explain why you’ve missed your EMI. Most lenders would allow deferring payment in case of a genuine reason such as a medical emergency. You will have to pay the EMI in the subsequent month. However, ensure that both the EMIs are paid on time in the next month. You may have to pay Personal Loan charges as a penalty for the late payment.
Seek Loan Extension
In case you are faced with an untoward situation such as job loss, or a medical emergency, where EMI repayment would be an issue in the coming months, ask the lender for a viable solution, such as an extension, or loan restructuring, and so forth.
Mobilize other Assets for Loan Repayment
You could seek a secured loan against your assets or investments, for example, getting a loan against property, FD, or gold. Since your new loan is for collateral, it would carry a lower interest rate. You can clear your pending EMI dues with the new loan and repay that later.
Loan Settlement
If nothing works in your favour and you don’t see any other way out, ask your lender for a loan settlement. It is not the best option and not an easy one too, yet the lender may consider it in a genuine case. Here, you can reach an agreement with your lender and repay a part of the loan and the lender will consider the loan as ‘settled’. It will negatively impact your credit report, though.
Conclusion
When taking a Personal Loan, take only as much loan as you can afford to repay easily. Use the PL EMI calculator online to know your EMI before taking a Personal Loan. Consider Personal Loan charges too and seek to be financially disciplined to ensure timely loan repayment. In event of a problem, never shy away from discussing the situation with your lender.
