Missed Your EMI Payment? Know the Consequences

Missing even one instalment can lead to a drop in the score by 50 to 70 points and getting a loan in the future could be difficult. Read to know more.
Missed Your EMI Payment? Know the Consequences
2 min read
19 Oct 2023

Key Takeaways

  • Choose a comfortable loan repayment schedule and EMI amount that can be committed to despite unforeseen circumstances
  • Talk to your lender about an EMI free period, lowering the EMI, or refinancing when a default is foreseen
  • CIBIL score and credit worthiness are adversely impacted when EMI payment is missed

When the pandemic hit India, there was an economic meltdown. With people losing jobs and their means of livelihood, EMI payment default was at an all-time high. During the pandemic, a moratorium period was offered and more than half the retail borrowers had opted for this. This is a testament to the fact that while people may have a well-thought-out financial plan, certain uncertainties like a loss of a job or a health issue can throw them off track.

While a global crisis offered some respite in terms of loan repayment, such kind of deferral may not always be available. People are bound to suffer consequences if they are unable to repay their borrowed amount on time.

As lenders, we at Bajaj Finserv advise our borrowers to choose a comfortable repayment tenure and follow the EMI payment rules because, missing one or two instalments may not seem like a deal, it will have an adverse impact.

One solution that offers a comfortable repayment tenure is the Bajaj Finserv Insta EMI Card. Shopping using the Insta EMI Card allows you to convert your purchases into easy No Cost EMIs, that you can repay over a period of 1 to 60 months.

What happens if EMI is not paid on time

Paying your EMIs on time is a very crucial process of availing the pay later scheme. If there is any delay in your EMI payments, it will have the following repercussions.

Decrease in the CIBIL Score

The most obvious impact is a decrease in the borrower’s credit score. Missing even one instalment can lead to a drop in the score by 50 to 70 points. Most lenders look for a high credit score of around 750, so getting a loan in the future will be difficult.

Questionable creditworthiness

A person’s credit score reflects their repayment history and a repayment default will reflect in the borrower’s credit report. This makes it difficult to borrow in the future and questions the person’s integrity and creditworthiness. They become risky borrowers for lenders and are considered to have high chances of defaulting on the loan repayment terms.

Penalties are levied

Multiple financial institutions charge a penalty for individuals who have missed their EMI payments. This can be in the form of late fees or a higher interest rate for the EMI. This amount is about 1% -2% of the EMI.

Property might be seized

If you took a loan against property and default on payments despite regular warnings, your property against which the loan was taken can be seized by the lender.

How can one avoid the default consequences?

Ideally, loan defaults should not be encountered at all. However, in the case of an unavoidable circumstance, a few steps can be taken.

1. Talk to the lender

When a borrower foresees a situation where they will miss an EMI payment, it is wise to discuss options with their lender and request a lower EMI. Lenders can lower EMIs by either extending the current loan tenure or increasing the rate of interest. Alternatively, they convert an unsecured loan to a secured loan.

2. Refinancing

Taking a top-up loan may be a good idea, but this is only possible if the credit score is high.

3. Better financial planning

To prevent a loan default, plan finances more efficiently. Don’t go for a higher loan amount, higher repayment amount, or a shorter tenor that can be comfortably managed.

4. Part payments with additional income

When there is a surplus of funds like a bonus, opt for foreclosure or part prepayment to reduce the financial burden. Try and find another source of income or cut back on expenses.

5. Request the lender for an EMI-free period

In exceptional cases, such as a business halt or job loss, your lender may allow you to Stop paying your EMI for three to six months at their discretion. After this period, you will need to resume your regular EMI payment as perschedule. However, it is entirely up to the lender to decide whether or not to grant this flexibility of an EMI-free period.

Benefits of timely EMI payments

Conclusion

Bajaj finance EMI payment rules are suggestive of the fact that one must not be short-sighted while taking a loan. The monthly repayment amount, the tenor, the repayment continuity despite a temporary halt in cash-flow must all be factored in while taking a loan. The convenience and accessibility of personal loans must not be misused. While taking a loan is encouraged and has many pros, it is also wise to plan efficiently and thoroughly in order to prevent any default in repayment. It’s best to read up the latest posts by RBI which are around convenience of digital transactions, security of digital transactions and protection of customers, as per its 2022 Financial Literacy Week theme ‘Go Digital, Go Secure’ for more information.

Consequent to directive received from Reserve Bank of India, Bajaj Finance Limited has temporarily suspended issuance, sanction and Disbursal under it's online loan products "ECom" and "Insta EMI card". However, you can walk-in to any of our offline partner stores and get your product financed. Refer to the detailed FAQ on our website for further queries.

Disclaimer

While care is taken to update the information, products, and services included in or available on our website and related platforms/ websites, there may be inadvertent inaccuracies or typographical errors or delays in updating the information. The material contained in this site, and on associated web pages, is for reference and general information purpose and the details mentioned in the respective product/ service document shall prevail in case of any inconsistency. Subscribers and users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/ service document and applicable terms and conditions. In case any inconsistencies are observed, please click on reach us.

*Terms and conditions apply

Frequently asked questions

What happens if I miss an EMI payment?

Missing an EMI payment can lead to late fees, negatively impacting your credit score. Continuous defaults could result in legal action or asset repossession.

Can I pay my EMI after due date?

Paying EMI after the due date usually incurs late fees. Prompt payment helps avoid negative credit score effects and financial penalties.

What is the average late payment charge for missed EMIs?

Average late payment charges vary by lender and loan type. They often range from 2% to 5% of the outstanding EMI amount.

When is a late payment considered a default?

A late payment turns into a default after a certain grace period, typically 90 days. Legal actions may follow, affecting your financial standing.

Do missed EMI payments affect my credit score?

Yes, missed EMI payments can significantly lower your credit score. Consistent timely payments are vital to maintaining a positive credit history.

How many credit score points will be reduced for a single missed payment?

A single missed EMI payment can decrease your credit score by around 50-100 points, but actual impact depends on individual credit history and scoring model.

What happens if I pay EMI one day late?

If you pay your EMI one day late, you may incur a late payment fee from your lender or financial institution. The specific consequences can vary depending on the terms of your loan or credit agreement. It's essential to check your agreement or contact your lender to understand the late payment policy and potential charges.

Does 1-day late payment affect CIBIL Score?

A 1-day late payment typically does not have an immediate impact on your CIBIL (Credit Information Bureau of India Limited) score. Credit bureaus usually start recording late payments after a grace period, which is typically more than a day. However, it's still crucial to avoid late payments as they can negatively affect your credit score in the long run.

What is the penalty for a failed EMI?

The penalty for a failed EMI, often referred to as a bounced EMI, can include late payment fees, additional interest charges, and in some cases, penalties imposed by the lender. The specific penalty amount may vary depending on your lender's policies and the terms of your loan or credit agreement. It's essential to be aware of these penalties to avoid financial repercussions.

Show More Show Less