What Happens When You Miss Your EMI Payment?

What Happens When You Miss Your EMI Payment?

Borrowing to address both planned and unplanned financial requirements has been one of the most likely choices for consumers in recent years. A loan is the best option when it comes to funding a large-ticket purchase, vacation, consolidating existing loans, or dealing with a medical problem.

Loans have a variable payback term, which allows the borrower to choose the repayment term that best suits their needs and budget. Despite picking the preferred repayment term, there are times when debtors might well have problems affording one or two EMIs.

'Loan Defaults' refers to the failure to pay an EMI on a personal loan. Let's look at what happens if an EMI payment is not paid on time. So without wasting any more time let’s dive right into it.

•  Your lending institution will contact you.

When you miss an EMI, your lending institution will make an attempt to contact you via email, postal, or voice. They will inform you of the consequences if you fail to make your repayments or continue to do so.

They will most probably offer you a specific number of days to complete your payments in order to avoid charges.

•  Effect on credit history

Your credit history keeps track of all of your debt-related financial transactions. Payment information, such as EMI durations and amounts, is included in the credit history that CIBIL uses to determine your credit score. Your lender will report all of your late or missed EMI payments to CIBIL. These variables have a negative impact on your credit rating. If you delay even one payment, your credit rating will suffer. It gets quite difficult to secure loans in the future if you have a bad credit rating.

•  Increased financial pressure

If you miss an EMI payment for a month, you'll have to pay two installments plus a penalty fee the following month. A prudent borrower keeps track of his or her money by paying EMIs on schedule and maintaining monthly payments minimal.

•  Increase in interest rate

If you default on a monthly basis, the interest rate on the late fee can rise as a penalty for late payment of EMI. This is contingent on the financial institutions in order for consumers to avoid additional defaulting. You might also not have much to say in this respect because you accepted the loan agreement. This will simply make your debt position worse. So check the fine print and don't make a mistake.

•  You can lose your security

It's possible that you'll lose your assets due to missed EMI payments, but it all depends on the characteristics of the loan you hold.

The lending institution can remove and sell your assets if you have a secured loan. If you put your apartment up as security, the lending institution will need to have a court order to take it back. If you have an unsecured loan, the lending institution will have a more challenging time forcing you to liquidate your belongings. However, they could file a charging order with the courts to have the loan attached to your property. This would be used only as a last option.

Also read about how to get instant loan

What to do when you miss your EMI payment?

These are some of the steps that you can take when you miss your EMI payments:

•  Prepare your documents and contact your lender

Make a folder with all of your previous EMI payment information, any bank notices you received, and information about the loan, such as the date you took it out, the period of the loan, the interest payment, the EMI amounts, etc. Bring this with you when you speak with your bank. Inform your lender of the real reason(s) you can't make your EMIs, that you'd like to pay off your loan as soon as possible, and that you'd like to know what your choices are.

•  Take a debt consolidation loan

A debt consolidation loan enables you to consolidate all of your liabilities into a single payment. You add up all of your obligations, get a fresh loan, and use it to settle everything off.

A consolidation loan has the added benefit of making monthly payments more manageable (typically with a reasonable interest rate and a prolonged repayment period) and easier to manage because you simply have one payment to calculate every month.

If you're exploring this choice, be sure that you'll be using the new loan to pay off your debts and improve your financial situation.

Conclusion

Every type of debt entails a certain amount of potential risk and accountability. Before taking out a loan, one must understand the repercussions of default. Maintaining a solid credit history necessitates being disciplined with EMI payments. This provides you with the financial flexibility to lead a healthy life.

We hope this article helps you in identifying the consequences of missed repayment.