People purchase their dream destination tickets, dream houses, favorite watches, and whatnot. Some dreams can be quite pricey. Apart from that, they can even face unforeseen situations like unexpected medical expenses, etc. All of these can need a huge amount of money. People might need to avail personal loan from various banks or online mobile loan apps to solve these kinds of issues. It can be a very convenient option for all because there is no need to face the hassle of running to a bank. Moreover, easy EMI facilities are usually associated with these loans.
EMI is a very easy option to repay the loan amount and the interest. This loan amount should be repaid to the lender within a predefined time frame. But sometimes, EMI can be missed by mistake. It is not a very healthy practice though; people need to remember their due dates for EMI. If you also face this issue, you must consider some factors. Here, you can find out what to do when you miss your EMI.
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Defaults in payments
Defaulting on your loan repayments is skipping your EMI payments. Based on how many days have passed since your EMI payments are due, there are two different types of defaults.
- Minor default occurs if your EMI is unpaid for up to 90 days. A minor default could have serious repercussions, but you can make up for it over time by paying the amount that is due.
- Major default: This occurs if you do not pay your EMI for more than 90 days. Your loans would be categorized as “Non-Performing Assets” if your EMIs are seriously delinquent.
What are the major consequences if you have missed your EMI within the mentioned time frame?
You can better appreciate the significance of timely repayment and maintaining your financial stability when you know the impacts of missing your EMIs.
If you don’t make your repayments on time, the below-mentioned things may occur to you:
- Penalty fees: Your EMI payments will eventually accrue late fees and penalty charges if you keep putting them off. The fines differ from lender to lender. The late fees are also based on how many days you skip an EMI. Many lenders provide an initial grace period during which there are no penalties. However, you must review your loan agreement to comprehend the repayment terms.
- Negative creditworthiness: A three-digit number known as your credit score provides detailed information about your payment practices. Your credit score drops every time you don’t pay your EMI on time. This may have a long-lasting negative impact on your credit profile. Simply put, it will affect your creditworthiness, creating problems when you apply for new loans or credit cards.
- Lower chance of good loan options: After the lender carefully evaluates your credit profile, you receive a credit offer. Although the eligibility requirements for different lenders vary, having a poor credit history and low credit score significantly lowers your chances of being approved for a loan with these lenders.
- Defaulter account marking: When your account is listed as defaulter or delinquent, you have broken the loan agreement terms by failing to make past-due payments. Although being listed as a defaulter has more significant effects than being listed as delinquent, both greatly harm your credit report.
What are the further steps when you miss your EMI dates by mistake?
If you miss your EMI within the due date, here is what you should do.
- Inform the lenders about your situation if they are trying to collect on your unpaid EMIs if facing a financial crisis. You can even discuss your options for repayment with your lender and ask for permission to make partial payments.
- Consider your income, expenses, and savings before setting your repayment priorities. Make a list of your past-due payments next, including details like interest rates, the amount owed, the minimum payment needed, etc. After that, choose which EMIs you want to pay off first.
- You can ask your lender for permission to pay back your loan calculation in installments. The stress of having to repay your loan all at once will be decreased as a result.
- Use any available savings or an emergency fund to pay off your EMIs. This will prevent your credit score from further decline.
- Consider taking out an emergency loan if you don’t have sufficient savings or an emergency fund. You can take out an emergency loan to pay off a single loan that combines your current obligations and past-due EMIs.
Understanding that EMI should always be cleared off on time is always a good idea. You can set reminders to pay off your EMIs online, too. Make a calendar schedule to mark due dates for your EMIs. You can also use loan calculator to understand the amount of EMI.