What Happens When You Default on a Loan

What Happens When You Default on a Loan

A loan default begins with a missed equated monthly instalment (EMI) and brings bounce and penal charges and a lower CIBIL score. If dues stay unpaid for more than 90 days, the account becomes a non-performing asset.
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In summary

A default costs more the longer it runs, so act at the first missed EMI. Lenders classify overdue accounts in stages, and an account overdue for more than 90 days becomes a non-performing asset (NPA).


  • A Bajaj Finance Personal Loan carries bounce charges of Rs. 700 to Rs. 1,200 per bounce.
  • Penal charges are up to 36% per annum on the overdue instalment.
  • Recovery agents must not call before 8 AM or after 7 PM.
  • Talking to the lender before a default deepens gives you the most options.

Planning a new loan? Check your loan offer with your phone number and a one-time password (OTP) → apply online in about 5 minutes → receive funds within 24 hours* of approval.

What happens when you miss an EMI?

When you miss an EMI, the lender charges a bounce charge and penal charges on the overdue amount, and contacts you for payment. A missed payment reported to credit bureaus lowers your CIBIL score, and a longer default lowers it further.

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What are the stages of loan default?

The stages of default follow the Reserve Bank of India's (RBI's) classification of overdue accounts, from Special Mention Account (SMA) to NPA. The table shows each stage.


Overdue periodRBI classificationWhat it means for you
1 to 30 days overdueSMA-0Bounce and penal charges; the missed payment can be reported
31 to 60 days overdueSMA-1Missed payments show on your credit report; CIBIL score falls
61 to 90 days overdueSMA-2Recovery contact steps up
More than 90 days overdueNon-performing asset (NPA)Account in default; recovery action can begin

Last updated: 21st October, 2026


The classification is applied by the lender under RBI rules. Pay as early as you can to stop the account moving to the next stage.

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What rules govern loan recovery?

Lenders and their agents must follow RBI rules on recovery conduct after a default. Recovery agents must not call before 8 AM or after 7 PM, and must not threaten or harass borrowers.


If an agent breaks these rules, complain to the lender first, then through the RBI's complaint channels. This page does not give legal advice.


Worked example: Mohan in Tiruchirappalli

Mohan is 37 and works as a salaried textile mill supervisor in Tiruchirappalli. He earns Rs. 68,000 a month and has a CIBIL score of 748. He took Rs. 2.4 lakh for his son's college fees at an illustrative 15.5% per annum, and checks how a default would affect him.


EMI = P × R × (1 + R)^N ÷ [(1 + R)^N − 1]. P is the loan amount in rupees, R is the annual rate divided by 12 and by 100, and N is the tenure in months. The formula spreads the principal and interest into equal monthly payments, so early EMIs carry more interest and later ones more principal. All figures are rounded to the nearest rupee.


TenureMonthly EMI (Rs.)Total interest (Rs.)EMI as share of salary (%)
36 months (3 years)8,37961,62812.3
48 months (4 years)6,74083,5389.9

Last updated: 21st October, 2026


On the 36-month loan, one missed EMI of Rs. 8,379 adds a bounce charge of Rs. 700 to Rs. 1,200. Penal charges add up to about Rs. 251 for a month overdue, at 36% per annum. The processing fee on Rs. 2.4 lakh was up to Rs. 9,912. Mohan sets up an auto-debit for the day after payday, to avoid any default.


What can delay approval: a CIBIL score below 650 or existing EMIs that take up a large share of your income. Names or addresses that do not match across documents, and more than one loan application in the same month, can also slow it down.


Want an EMI that fits so you never face a default? With a Bajaj Finance Personal Loan, you can borrow Rs. 40,000 to Rs. 75 lakh, subject to eligibility. Check your loan offer with your phone number and a one-time password (OTP) → apply online in about 5 minutes → receive funds within 24 hours* of approval.

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What are the eligibility criteria and documents required?

Your record of avoiding default shows in your CIBIL score. To be eligible for a Bajaj Finance Personal Loan, you need to meet the criteria listed below:


CriterionRequirement
NationalityIndian
Age21 years to 80 years.
Employed withPublic, private, or multinational companies (MNCs).
CIBIL Score650 or higher.
Customer profileSelf-employed or Salaried

*You should be 80 years or younger, at the end of the loan tenure.

Last updated: 21st October, 2026


Meeting these criteria does not guarantee approval, which depends on eligibility, verification and credit assessment. No collateral or guarantor is required.


You may need the following documents, subject to your profile and application:


Document categoryAccepted options
KYC proofAadhaar/ passport/ voter’s ID/ driving license/ Letter of National Population Register/ NREGA job card
Identity proofPAN card, Real-time image / photograph
Employment proofEmployee ID card, Letter of Allotment of Accommodation Issued by Employer
Income proofSalary slips — last 3 months, Bank account statements — last 3 months
OthersPension order, Utility bill, Phone bill, Piped gas bill, Property / Municipal tax receipt

Not every applicant needs every document. Confirm the final list of required personal loan documents during your application.

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What interest rate and charges apply?

Bajaj Finance interest rates and charges on a Personal Loan, including the charges on default, subject to applicable terms and customer eligibility, are listed below:


ChargeAmount
Interest rate10% to 30.5% per annum, subject to applicable terms and customer eligibility
Processing feeUp to to 4.13% of the loan amount, inclusive of applicable taxes
Bounce chargesRs. 700 to Rs. 1,200 per bounce
Penal chargeUp to 36% per annum on the overdue instalment
Part-prepayment and foreclosure (Term Loan)Up to 4.72% of the principal, inclusive of applicable taxes
Part-prepayment (Flexi Dropline and Flexi Hybrid Loans)No charge
Flexi facility chargeRs. 1,999 to Rs. 18,999, inclusive of applicable taxes
Annual maintenance (Flexi Dropline Loan)Up to 0.295% of the Dropline limit
Annual maintenance (Flexi Hybrid Loan)Up to 0.472% in the initial tenure; up to 0.295% in the subsequent tenure

Last updated: 21st October, 2026

*Terms and conditions apply.


Charges are disclosed in the applicable product information and loan documents, so read your Key Fact Statement before you accept. Add the processing fee to the interest when you compare offers, and see the personal loan interest rates and charges page for details.

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How do you recover from a default?

You recover from a default by paying the overdue amount as soon as you can, then talking to the lender about the rest. The table sets out the options.


SituationWhat to doTrade-off
One missed EMIPay it with charges at onceBounce and penal charges
Temporary drop in incomeContact the lender before the next due dateTerms depend on the lender
2 or more loans overdueList every EMI and pay the costliest firstOthers stay overdue a little longer
Account settled for less than duePay in full later to update the recordA settled status stays on your report

Last updated: 21st October, 2026


Get every agreement with the lender in writing. Check your credit report after paying, to confirm the default is updated.

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How do you apply?

You apply for a Bajaj Finance Personal Loan online in five steps:

  1. Check loan eligibility: Enter the required loan amount and repayment period, then click "CHECK LOAN OFFER".
  2. Enter personal details: Enter personal, financial and employment details to receive a personalised offer.
  3. Loan offer: Review the offer details and adjust the amount or tenure to suit the applicant's needs.
  4. KYC verification: Complete KYC and verify bank details.
  5. Talk to loan specialist: The application is submitted and an executive contacts the applicant about the next steps.

The process may differ for new and existing customers, and some customers may need to provide additional documents. At the offer step, choose an EMI you can pay every month, even in a lean one.

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Key offerings: 3 loan types

  • Flexi Hybrid Loan
  • Flexi Dropline Loan
  • Term Loan

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    You can pay interest-only EMIs for up to 36 months, after which, the EMI will consist of both, the principal and the interest. EMI is applicable only on the withdrawn amount.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest on the loan amount you withdraw.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Amount disbursed in one go
    The entire loan amount is disbursed at the start.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest.

  • Flexi facility charges
    No Flexi facility charges.

Personal loan interest rate and applicable charges

Type of fee

Applicable charges

Rate of interest per annum

10% to 30.5% p.a.

Processing fees

Up to 4.13% of the loan amount (inclusive of applicable taxes).

Flexi Facility Charge

Term Loan – Not applicable

Flexi Loans –Up To Rs 1,999 To Up To Rs 18,999/- (Inclusive Of Applicable Taxes)

Will be deducted upfront from loan amount.

Bounce charges

Rs. 700 to Rs. 1,200/- per bounce

“Bounce charges” shall mean charges for (i) dishonor of any payment instrument; or (ii) non-payment of instalment (s) on their respective due dates due to dishonor of payment mandate or non-registration of the payment mandate or any other reason.

Part-prepayment charges

Full Pre-payment:

  • Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount as on the date of full pre-payment

  • Flexi Term (Dropline) Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

  • Flexi Hybrid Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

Part Pre-payment

  • Up to 4.72% (Inclusive of applicable taxes) of the principal amount of Loan prepaid on the date of such part Pre-Payment.

  • Not Applicable for Flexi Term (Dropline) Loan and Flexi Hybrid Term Loan.

Penal charge

Delay in payment of instalment(s) shall attract Penal Charge at the rate of up to 36% per annum per instalment from the respective due date until the date of receipt of the full instalment(s) amount.

Stamp duty (as per respective state)

Payable as per state laws and deducted upfront from loan amount.

Annual maintenance charges

Term Loan: Not applicable

Flexi Term (Dropline) Loan:

Up to 0.295% (Inclusive of applicable taxes) of the Dropline limit (as per the repayment schedule) on the date of levy of such charges.


Flexi Hybrid Term Loan:

Up to 0.472% (Inclusive Of Applicable Taxes) Of The Dropline Limit During Initial Tenure. Up to 0.295% (Inclusive Of Applicable Taxes) Of Dropline Limit During Subsequent Tenure

Credit guarantee scheme feeUp to 1.18% p.a. (pro-rated daily till 31st March) (inclusive of all applicable taxes) of the loan amount
Credit guarantee scheme renewal feeUp to 1.18% p.a. (inclusive of all applicable taxes) on the outstanding loan amount as on April 01 of the subsequent Financial Year.
*Renewal Fee to be collected only for 3 subsequent financial years.
 
**If the Remaining Tenure is less than 12 months, the CG Fee in subsequent years shall be charged prorated.

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Frequently asked questions

Consequences

Recovery

What happens if I miss one EMI?

The lender charges a bounce charge and penal charges on the overdue amount, and contacts you for payment. On a Bajaj Finance Personal Loan, bounce charges are Rs. 700 to Rs. 1,200 per bounce, and penal charges are up to 36% per annum on the overdue instalment. Pay at once to stop a default from building.

 An account overdue for more than 90 days becomes a non-performing asset under RBI rules. Before that, it passes through the SMA-0, SMA-1 and SMA-2 stages at 30, 60 and 90 days. Each stage is reported to credit bureaus, so a long default lowers your CIBIL score more than a short delay.

No. Under RBI rules from August 2022, recovery agents must not call before 8 AM or after 7 PM, and must not threaten, abuse or harass borrowers. If an agent breaks these rules, complain to the lender in writing first. If that does not resolve it, use the RBI's complaint channels after a default.

Pay all overdue amounts, then pay every EMI and card bill on time from then on. Since January 2025, lenders report every 15 days, so on-time payments show sooner than before. Avoid new loan applications for 3 to 6 months, and check your credit report to confirm the default has been updated.

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Bajaj Finance Limited has the sole and absolute discretion, without assigning any reason to accept or reject any application. Terms and conditions apply*.
For customer support, call Personal Loan IVR: 7757 000 000