Personal loan

Did you miss your EMI personal loan? Know the repercussions and how to manage them


Suppose you have already used a personal loan to finance your emergency needs or for other reasons, with a term of almost 5 years. Considering that we are living in uncertain times due to covid, there may come a time when you cannot pay for any of your NDEs due to unforeseen circumstances. It cannot be emphasized enough how essential your loan repayments are to ensure that you are not classified as a subprime borrower by the bank. You will be classified as defaulter if you do not make an EMI payment on the due dates. An old age “wish for the best but prepare for the worst” also applies here. If you took a SBI personal loan or another financial institution, it is imperative to know the consequences of an EMI default on your personal loan and how you could prevent it from happening.

Decreases your creditworthiness

Did you know that even missing an EMI payment on an SBI personal loan can drop your credit score by 50 to 70 points? Not only that, most lenders check the credit report of the borrower’s repayment history and defaults, if any, before lending them a loan. If you decide to opt for a personal loan or any other loan at a later date and the previous bank classified you as a high-risk borrower, the IME default may be one of the reasons for your loan application being rejected.

Fees and penalties

SBI personal loans and other financial institutions offering personal loans in Delhi levy late fees as a penalty for people who have not made their EMI payments. It is usually around 1 to 2% of the amount owed by the EMI, and other penalties are added to the outstanding loan balance. This makes the total amount owed much higher than what you owe in the first place.

Increase in total loan amount

As you will delay the payment of your SBI Personal Loan or any other Personal loan in Delhi you must have taken, the total amount payable will increase due to any additional interest / charges taken from it.

Impacts your CIBIL co-signer score

Sometimes when you get a personal loan in Delhi or any other city in India, the bank may ask for a co-signer or a guarantor if your credit score was low when getting a loan. When you default on your SBI personal loan EMI, you will also affect their credit score.

As we have seen from the aforementioned points, how, in the event of non-payment of a personal loan, EMI can lead to a lowering of your credit rating and your solvency, without having financial implications. Here are some methods you can use to prevent such situations from happening again in the future.

Better planning

Most of the time, it is the borrower’s inability to plan their spending that causes them to default on their EMIs. To make sure you don’t default on your SBI personal loan IMEs, plan your finances more effectively and cut back where needed.

If necessary, request a lower EMI.

Due to unforeseen circumstances caused by medical bills or job loss, it can be difficult for a borrower to continue paying their IME. In such cases, it is suggested that the borrower goes to the bank and informs them of their current situation. In most cases, banks lower the EMI by converting an unsecured loan to a secured loan or by extending the term of the existing loan.

Opt for partial payments

Partial payments are one of the best ways to reduce the burden of EMI payments and interest rates. If you are involved in a business where you receive excess funds, use those funds to make a partial payment on your loan.

Follow the 50-50 rule.

To be able to repay your personal loan, IMEs require the borrower to be financially disciplined. This means evaluating your personal loan repayments and interest rate beforehand, and never going for an IME that is more than 50% of your monthly income.

Start maintaining an emergency fund.

Many times a default on his EMI personal loan is due to the occurrence of unforeseen circumstances. To ensure that you have enough funds to finance your emergency needs during the active life of a personal loan, you need to have an emergency fund to draw on during a financial crisis. Ideally, the emergency fund should hold around six months of your salary. This way you won’t default on your SBI personal loan EMI or any Delhi personal loan you have taken out if something unexpected happens.

Ask your friends and family for financial help

If such a situation arises where you might not be able to pay your monthly IMEs, ask your close friends and family for an interest-free loan to help you pay off the IMEs. This way your credit score will not be affected and your creditworthiness in the eyes of the bank will also be maintained.

Defer payment of the EMI

If you have defaulted on your EMI for a month for real reasons but think you will be able to pay collectively after a few months, go to your bank and state your situation. Most personal loan providers in Delhi can accept and allow you to pay your EMI in the following months, but you will be charged a late fee. They can also give you the option of only paying the interest for a few months.

The consequences can be twofold: financial and reputational. From a financial point of view, you will be charged late fees, penalties and other charges. The damage to reputation is even worse. A single default can dramatically lower your credit score. Additionally, it could make you ineligible for additional credit. In case you are unable to pay your IMEs due to genuine financial hardship, contact your lender to find a solution and they could either lower your IMEs by extending the holding period or offer you a mandate without an IME for a brief period until. ‘so that your current financial situation improves. Remember that a borrower’s repayment history plays an important role in determining their future loan eligibility.