Missing a personal loan EMI essentially indicates financial weakness, a lack of planning, and poor management on the part of the borrower. This is a big negative in the eyes of the lending institution. Furthermore, keeping the above factors in mind, here’s what every borrower should understand.
Rising penalties, default risks and long-term damage
- Missing or late payment charges generally range between 1% and 2% of the overdue EMI. This comes along with the penal interest expenses on the outstanding amount.
- The loan may be classified as an NPA, i.e., Non-Performing Asset, if it remains unresolved beyond 90 days. This can severely damage one’s credit profile.
- Failure to meet personal loan EMI deadlines might result in recovery action against the borrower.
- Collection calls, text messages, and direct confrontation, followed by legal proceedings under various provisions of the Indian Contract Act and the Indian Constitution, may be taken in extreme cases.
- A bad credit record, along with a default, remains on your credit report for several years. This makes applying for and securing new personal loans, home loans or credit cards complicated and very difficult.
How can you protect your credit integrity from slipping?
To ensure that your credit integrity remains intact, you should:
Aspiring borrowers should clearly understand that missing a personal loan EMI is far more than a minor inconvenience. It can result in a substantial loss of your credit integrity and a serious drop in your credit score. Furthermore, a weak credit profile can also result in increased borrowing costs on future loans, which is why being proactive can save borrowers from major financial trouble later on.
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