What Is Accrued Interest on Overdue Loans

Accrued interest is the interest that has built up on your outstanding loan balance, whether or not you've actually paid it yet, and it keeps growing for as long as the amount stays outstanding.

• The clock runs on your outstanding balance, not your original loan amount. Once you've made payments and reduced your principal, future interest accrues on what's actually left, not what you originally borrowed.
   
• Missing an EMI doesn't just delay one payment, it extends the accrual period. The longer an amount stays unpaid, the more interest builds on top of it, so the real cost of a missed EMI grows the longer you wait to clear it.
   
• Regular accrued interest and penal charges are two different things. Accrued interest is the ordinary cost of borrowing continuing to apply, penal charges are a separate consequence for non-compliance and shouldn't be assumed to work the same way or accrue at the same rate.
   
• RBI rules require interest to be charged only for the period you actually owe money, not automatically rounded up to a full month, so check your statement rather than assuming a flat monthly charge.
   

Before making any overdue payment, check your actual outstanding amount through My Account or the Bajaj Finance App, since it will likely include accrued interest beyond your original EMI figure, not just the instalment you missed.

Accrued interest is the interest that has accumulated on an outstanding principal or other applicable amount over a specific period, even if it has not yet been paid. For a borrower, accrued interest shows how interest can build between scheduled payment or accounting dates. The amount depends on factors such as the outstanding principal, the applicable interest rate, the period the amount remains outstanding, the repayment schedule, and the interest calculation method specified in the loan agreement. For example, when interest is calculated periodically on the outstanding loan balance, it may accrue between repayment dates. If an amount remains unpaid beyond its scheduled date, the applicable terms may determine how interest continues to accumulate and the amount eventually payable. The exact calculation can therefore vary by loan product and agreement. RBI's Fair Practices Code for Lenders requires regulated entities to follow fair and transparent interest-charging practices. It also provides that, where applicable, interest should generally be charged for the period a loan remains outstanding rather than automatically for an entire month.

Why clearing overdue quickly stops interest accrual

Clearing an overdue loan amount promptly can help limit further interest accrual because interest is generally linked to the amount outstanding and the applicable period. The longer an amount remains unpaid, the longer interest may continue to accrue under the loan agreement.

• Reduces the outstanding amount: Paying the overdue amount reduces the balance on which applicable interest may accrue.
• Limits the accrual period: Prompt repayment reduces the period for which an outstanding amount remains unpaid.
• Prevents further overdue accumulation: Clearing the amount due can help prevent the overdue balance from continuing to build, subject to the applicable loan terms.
• Helps regularise the loan account: Timely payment can help bring the account up to date once processed and reflected.
• Avoids additional consequences: Continued non-payment may result in applicable charges or other consequences under the loan agreement.

Review the total amount payable before making a repayment, as it may include accrued interest and applicable charges. Paying promptly and retaining the payment confirmation can help you track whether the overdue amount has been cleared and the account updated.

How is interest accrued on an overdue loan account?

Interest on an overdue loan account generally accrues according to the interest rate, outstanding amount, repayment schedule and calculation method specified in the loan agreement. The longer an applicable amount remains outstanding, the longer interest may continue to accumulate.

The exact amount of accrued interest varies by loan and should be checked against the applicable loan agreement and account details. Reviewing the amount due and making timely repayments can help manage the outstanding balance and limit further accrual where applicable.

When a loan payment remains overdue, the applicable interest treatment can affect the amount required to clear the overdue dues. The consequences depend on the loan agreement, repayment status, and applicable regulatory requirements.

If an EMI is not paid on its due date:

1. The unpaid amount becomes overdue according to the applicable loan terms.
2. Interest may continue to be applied according to the agreed calculation method.
3. Applicable charges may arise where permitted under the loan agreement and relevant rules.
4. Continued non-payment can result in a longer period of delinquency.
5. The account's repayment status and credit information may be affected according to applicable reporting requirements.

RBI defines an amount due under a credit facility as overdue when it has not been paid on the due date fixed by the lender. For this reason, borrowers should check the current amount due rather than relying only on the original EMI amount once an account becomes overdue.

How can you check your loan dues through Bajaj Finance?

Checking the current loan account information through an official Bajaj Finance channel can help you understand the amount due before making a repayment.

Follow these steps:

1. Sign in to the Bajaj Finance App or My Account using your registered mobile number and OTP.
2. Open My Relations and select the relevant loan account.
3. Review the available loan details, including repayment information and outstanding dues.
4. If you need clarification, go to Help & Support.
5. Select Raise Request and choose the relevant loan servicing category.
6. Enter the required details and submit the request.
7. Keep the request reference number for future communication.

If you have already missed an EMI, check the current amount payable before paying. The amount may differ from the scheduled EMI if applicable interest or other authorised charges have become due.

Does penal interest also accrue daily on overdue loans?

Penal charges on overdue loans do not necessarily accrue daily; their application depends on the loan agreement and applicable terms. Penal charges are separate from the regular interest on the loan and should not be treated as an additional rate of interest. The exact method and frequency of applying penal charges can vary according to the applicable loan terms. Therefore, borrowers should check their loan agreement and account statement to understand how any penal charges have been applied. Do not assume specific rates or amounts unless confirmed through authorised information. If an EMI remains unpaid, the borrower should review the total amount due, including regular accrued interest and any applicable charges, and make the required repayment promptly. This can help prevent the overdue amount from continuing and allow the loan account to be regularised according to the applicable terms.