What happens if you miss a personal loan EMI?

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Missing a personal loan EMI isn’t just a minor slip—it can lead to penalties, credit score damage, and long-term financial consequences. Understanding what follows a missed payment can help you take prompt corrective steps and avoid deeper trouble.

Immediate financial penalties

The initial effect of a defaulted personal loan EMI is the penal interest charged by the lender. Most banks and NBFCs charge a late payment fee or penal interest, which is usually between 1% and 3% of the defaulted EMI. This is your additional payment burden and can create a disruption in your monthly budget if not paid in a lump sum. Some lenders also charge a flat fee in addition to the penal interest.

Effect on your credit report

Even one EMI default can harm your credit score, particularly if it is reported to credit reporting agencies such as CIBIL or Experian. The 50 to 100 points drop is highly probable in the event of default. This harm can make obtaining loans or credit cards in the future more difficult, or result in a higher rate of interest being levied based on perceived risk. In the event of a delay of more than 30 days, the impact is generally more negative on your credit report.

Loan account can be marked as delinquent

If your defaulted EMI is not recovered even after quite some time—usually more than 90 days—the lender will mark your loan account as an NPA. It's a negative flag on your credit report and can attract legal notices or recovery proceedings. Your loan will be passed on to a collection agency too, making it more complex and time-consuming to recover the amount.

Impact on future capacity to lend

Lacking an EMI on a personal loan impacts not just your existing credit score but can also jeopardize your future prospects for obtaining loans. Your history of payments is taken to be an important consideration factor by lenders when they process new applications. Default history can lead to rejection or even force you to take a loan at a higher rate of interest, or with additional collateral.

Bank may debit or automatically draw against accounts that are linked

If your EMI is deducted by ECS or auto-debit from a linked savings account, the bank will try to recover the EMI automatically if the account is sufficient. In case there is insufficient balance, you can also face an ECS bounce or dishonoured mandate. Banks can even set off the pending EMI by debiting the amount from the borrower's other linked accounts under certain conditions.

What to do if there is no EMI

In case one EMI has been skipped, the ideal thing to do, then, is to pay it off as soon as possible and also inform the lender. There would often be a skip period or restructuring facilities with most lenders if the skip has been made due to genuine financial grounds. You may also request rolling over the amount due in smaller instalments or skip one cycle of payment with papers.

Missing an EMI on a personal loan should not be ignored. Acting in time, being honest with your lender, and being prepared to get your payments back on track can help you avoid ruining your finances and credit score in the long run.