If you fail to pay your EMI (Equated Monthly Installment), the consequences can vary depending on the lender, loan type, and the number of missed payments. Here’s what typically happens:
- Late Payment Charges & Penalties
Most lenders impose late payment fees or penalties if you miss an EMI. These can range from 1% to 3% of the EMI amount.
- Impact on Credit Score
Missing an EMI negatively impacts your credit score (CIBIL score), reducing your chances of getting loans or credit cards in the future.
- Interest on Outstanding Amount
In addition to penalties, the lender may charge extra interest on the overdue amount, increasing the total loan burden.
- Reminder Calls & Notices
The lender will start sending reminders via calls, emails, and letters. Repeated missed EMIs may lead to legal notices.
- Loan Default & Legal Action
If you continue to miss payments for 90 days or more, the loan is classified as a Non-Performing Asset (NPA). The lender can:
- Personal Loans & Credit Cards: Initiate legal proceedings to recover dues.
- Secured Loans (Home/Car Loan): Seize and auction the collateral (house/car).
- Recovery Agents & Legal Proceedings
If the default continues, the lender may assign recovery agents to recover the dues or file a case in court.
How to Avoid EMI Default?
- Inform the lender in advance and request a restructuring of the loan.
- Opt for EMI moratorium (if offered in special cases).
- Convert outstanding dues into smaller EMIs (if the lender allows it).
- Use savings or emergency funds to cover EMIs in tough times.
By Pankaj Bansal
