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What happens when you miss a payment and incur a penalty charge
When you miss an EMI due date, most lenders apply a penalty charge as per the terms set out in your loan agreement. This charge is separate from your regular EMI and is added to your outstanding dues. Under RBI rules effective April 2024, this is levied as a fixed penal charge rather than penal interest, so it is not compounded or added to your principal. However, the missed payment itself is still reported to credit bureaus, and the penalty charge needs to be cleared along with your future dues.
How penalty charges affect your outstanding loan amount
A penalty charge changes your loan account in a few specific ways:
- It is added as a separate amount on top of your regular outstanding balance, not merged into your principal
- Since it is not compounded, it will not keep growing on its own if left unpaid
- It typically needs to be cleared before or along with your next EMI, depending on your lender's process
- Repeated penalty charges across multiple missed payments can add up, increasing your total dues over time
Clearing the penalty charge along with your regular EMI helps keep your account in good standing and avoids further follow-up from your lender.
Do penalty charges impact your credit score
The penalty charge itself does not usually appear as a separate entry on your credit report. However, the reason behind it, a missed or delayed EMI, is reported to credit bureaus and can lower your credit score. If delays happen repeatedly, this can affect your credit history and make it harder to get favourable terms on future loans. Paying your penalty charge and clearing your dues promptly helps limit any further impact on your credit profile.
Simple ways to avoid penalty charges each month
- Set up a NACH (National Automated Clearing House) mandate so your EMI is deducted automatically on the due date
- Keep sufficient balance in your linked bank account a day or two before your EMI date
- Set a reminder or mark your due date on a calendar
- Review your loan agreement and Key Fact Statement (KFS) to understand the exact penalty terms that apply to your loan
- Reach out to your lender in advance if you expect a genuine difficulty in paying on time
Building these habits early in your loan tenure makes it much easier to avoid penalty charges altogether.
What to do if you have already incurred a penalty charge
- Check your loan statement to confirm the exact penalty amount and the reason it was applied.
- Clear the penalty charge along with your next EMI or as instructed by your lender.
- Set up a NACH mandate or reminder going forward to avoid repeating the same delay.
- If you believe the charge was applied in error, raise a request with your lender's customer support, quoting your loan account number and transaction details.
- Keep a copy of your updated statement once the charge is cleared, for your own records.
RBI rules on penalty charges
RBI's guidelines, effective from 1 April 2024, cover how lenders can levy penalty charges:
| Rule | What it means |
|---|---|
| Fixed penal charge | Charged as a flat amount, not as compounding penal interest |
| Must be reasonable | Charges must be proportionate to the default, not a revenue source |
| Disclosed upfront | The amount must be mentioned in your loan agreement and KFS |
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Frequently Asked Questions
Penalty Charges Basics
Avoiding & Resolving Penalties
Impact & Charges
What is the penalty for late EMI payment?
There is no fixed nationwide amount. RBI requires it to be a reasonable, proportionate fixed charge, not compounding interest. The exact amount varies by lender and loan type, and is specified in your loan agreement and Key Fact Statement (KFS).
What are the penalty charges for missed Bajaj Finance EMI payments?
Missed EMI payments attract penalty charges, including late fees and interest on the overdue amount. The exact penalty depends on the loan agreement. You can check details on the Service Portal under your loan summary or by contacting Bajaj Finance customer support for clarification.
How do EMI bounce charges work with Bajaj Finance?
EMI bounce charges are applied when an EMI payment fails due to insufficient funds or other reasons. These charges include a penalty fee and additional GST. You can view these details on the Service Portal or by referring to your loan agreement for specific terms.
How can I avoid penal charges?
You can avoid penal charges on their loan account by:
- Ensuring timely payments by keeping sufficient funds in your bank account.
- Making prior payments before the stipulated date through the service portal, if your EMI will bounce due to insufficient funds on the usual date.
- Ensuring that your bank account information is updated on the customer service portal.
How can I resolve EMI bounce issues with Bajaj Finance?
To resolve EMI bounce issues, repay the missed amount promptly through the Bajaj Finance Service Portal or offline channels. Ensure sufficient balance in your account for future EMIs. You may also contact Bajaj Finance for alternative solutions or repayment options to avoid further charges.
How can I pay my overdue EMI to avoid additional penalty charges?
Sign in to your lender's customer portal or app and clear the overdue amount as soon as possible. Setting up a NACH mandate going forward helps you avoid future delays, since your EMI gets deducted automatically on the due date.
Will penalty charges affect my CIBIL score?
The charge itself does not usually show as a separate entry. However, the missed or delayed EMI behind it is reported to credit bureaus and can lower your score, especially if delays happen repeatedly rather than just once.
Are penalty charges and bounce charges the same?
No. Bounce charges apply when an EMI payment fails, often due to insufficient balance or a technical issue. Penalty charges apply when a payment is late or in default. The two can occur separately or together, depending on the situation.
Can penalty charges be waived by Bajaj Finance?
Any waiver, if applicable, is at the lender's discretion under its board-approved policy and is not guaranteed. There is no standard or automatic waiver process. For specifics, it is best to check directly with Bajaj Finance customer support.
