What happens if you miss your EMI?
You have taken a loan and your EMI is failing, so what problems can happen? You might say that you have missed your EMI. In that case, the bank will tell you that penal charges will be applied, and if the EMI bounces, the bank also charges bounce charges. But apart from this, your CIBIL score can also get damaged. When you take a loan and miss your EMI, what type of problems you may face and how you can deal with them will be explained here.
If you miss your EMI for one or two months, what problems can happen?
Obviously, you will have to pay penal charges. The bank may charge a fixed fee or calculate a percentage and collect money from you. Your loan amount may also increase. At the same time, your credit score may drop. Your report becomes negative. It may show overdue and late payment. The biggest problem usually comes from the bank’s side. The bank may call you repeatedly and send messages. Sometimes they call so frequently for collection that it can cause a lot of stress.
A few days ago, a customer came to me for consultation. He said that they were disturbing him with too many phone calls and sometimes they use very bad methods which are not legally correct, but banks still do it and it becomes very difficult to stop it. Sometimes the bank may even send a recovery agent to your house for collection. In that situation, you may feel very awkward when someone comes to your home for recovery.
What happens if you continue missing your EMI?
If you continue missing your EMI, the situation can become worse. Your payment history may start showing negative statuses such as SMA. The number of days you delay the payment will also be shown as late payment in the report. The loan amount keeps increasing. If the delay goes beyond 3 months, the account can move into NPA status.
In some cases, if the delay continues for a longer period, the bank may apply negative statuses such as Written Off. It may also show statuses like Willful Default or Suit Filed. Because of this, it can become very difficult for you to get a loan in the future. In some cases, certain banks may also file a case against you in court.
If you keep missing EMIs continuously, the loan amount keeps increasing. Penal charges are added and interest keeps increasing. Because the total amount becomes higher, you will eventually have to pay it later. This increases the overall cost of the loan. Normally when you repay the loan on time, you only pay the regular interest and charges. But in this case, even more charges are added because the loan amount that you did not pay and failed to pay is also charged with interest along with penal charges.
How can one avoid the default consequences?
When such a problem happens and you have missed your loan EMI for one or two months, it can sometimes happen. But you should pay that EMI amount as soon as possible. Otherwise, the loan amount will increase further. Also, your CIBIL score may get affected and overdue may be shown in your report. For that, you can update it online.
Normally, once you make the payment, it gets updated quickly. A new guideline from the Reserve Bank of India has also recommended faster updates. But if it is still not updated, you can raise an online dispute.
Sometimes situations arise that can be called unavoidable situations. For example, someone in the family suddenly becomes ill, you lose your job, or there is a financial crisis. In such a situation, you can immediately go to the bank manager and request loan restructuring. In this case, the EMI may be reduced and the tenure may be increased. However, it is not very easy. In many cases, bank managers do not approve it, but if you have a good relationship with the bank, the manager may consider it. So you should definitely request the bank to restructure your loan.
Before taking a loan, you should always plan properly
Financial planning is very important. According to normal banking rules, a customer is usually allowed to take loans where the EMI is around 50% to 60% of their income. However, some NBFCs provide loans beyond a customer’s actual EMI repayment capacity and offer higher loan amounts based on income, which results in higher EMIs.
It may be possible for some customers to pay it, but there are also customers who face problems. I run a loan agency and also run a CIBIL rectification agency. I see some customers who have taken too many loans and are not able to pay their EMIs. To pay the EMI of one loan, they take another loan. Because of this, their loan burden increases even more and finally they become permanent defaulters. In the future, they may not be able to get any loan. So you should avoid doing this.
You should always keep in mind that a financial crisis can happen at any time. Someone in the family may suddenly fall ill. So you should do financial planning accordingly. Take loans carefully and wisely. You should only take a loan for which you can comfortably pay the EMI according to your repayment capacity.
CIBIL Score improvement services
Sometimes there may not be any clear problem in your CIBIL report. You may have applied for a loan but it still gets rejected. The bank manager may say that your CIBIL score is low and they cannot approve your loan. But after reading the report, you may not understand where the problem is or why your CIBIL score is low. In such cases, you can send your report to us.
The Scorerocket team will analyze your report and tell you where the problem is and why your CIBIL score is low. After that, if you want to improve your CIBIL score or get your report rectified, you can also use our service.