Missing an Equated Monthly Installment (EMI) payment on a personal loan can have significant financial consequences and impact your creditworthiness in a negative way. You might be well aware that personal loans aren’t secured by collateral like a car or a house. As a result, lenders often have much stricter terms and consequences for missed payments.
Always remember that if you are planning to avail this loan type, always have a repayment plan at the back of your mind. With this, you’ll be able to plan your finances accordingly.
What is a personal loan?
It is an unsecured loan where an individual is not required to use any collateral as a security. Nowadays, this loan type is the most common one availed by many individuals and is popular because of its comprehensive use cases.
This financial instrument requires a person to pay back the principal amount along with interest in Equated Monthly Installment, or EMI, spread out over a period considered the repayment tenure. Many companies offer interest-free tenures, too.
What happens if you miss an EMI payment on Personal Loan?
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Late Payment Fees
Most lenders impose a penalty or late payment fee when you miss an EMI payment. Keep in mind that this fee can vary depending on the lender and the terms of your loan agreement. Most of the time, it’s generally a percentage of the outstanding EMI amount.
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Negative Impact on Credit Score
It is obvious that if you miss an EMI payment, it can significantly harm your credit score. The credit bureaus record late payments, and this negative information can stay on your credit report for many years. A lower credit score affects your ability to secure credit in the future.
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Affecting Financial Future
If you regularly default on personal loan EMIs, it can have long-lasting consequences on your financial future. It can make it quite challenging to secure loans for other purposes, such as buying a home or a car. Further, it may also affect your ability to rent a property or get specific jobs, as many employers check credit scores as part of their hiring process.
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Accrued Interest
When you miss an EMI payment, you still owe the principal amount along with the interest applicable for the missed period. The lenders here often add this interest to the outstanding balance, which means you end up paying more over the loan’s term. Also, the Interest rate on personal loan is quite lucrative so plan your investment wisely so that you pay off the loan without missing an EMI.
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Legal Action and Recovery Measures
If you repeatedly miss EMI payments by any chance and the outstanding amount becomes significant, the lender here may resort to legal action in order to recover the debt. This can include sending legal notices, hiring collection agencies, or even initiating a lawsuit.
Which is the best app for a personal loan?
Stashfin! Around a month back, I was looking for such a loan in order to purchase a two-wheeler. Instead of asking my friends or relatives, I was aware of this type of financial help. Here is a step-by-step guide on how to avail this loan from this app:
- Download the app from the Play Store/App Store
- Sign up using your mobile number
- Add your personal details to check your credit limit
- Complete KYC, and you are good to go!
(Tip: It is always advisable to use a personal loan EMI calculator before investing your hard-earned money.)
