Finance Desk – With rising household debt and increasing defaults in the retail segment, missing a personal loan EMI is a serious issue. The Reserve Bank of India (RBI) has urged borrowers to be careful and follow responsible borrowing habits.
Here are 5 major consequences of missing your personal loan EMI:
- Credit Score Drops
- Even missing one EMI can reduce your credit score by 50 to 70 points.
- A lower credit score makes it harder to get new loans or credit cards.
- Lenders may also charge you higher interest rates.
A poor credit score makes borrowing in the future more difficult.
- Extra Charges and Interest Pile Up
- Banks and NBFCs usually charge a late fee of 1–2% of the EMI.
- In addition, penal interest is added to overdue payments.
- This increases your total loan amount and makes repayment harder.
- Minor vs. Major Default (NPA Classification)
- If you miss payments for less than 90 days, it is called a minor default.
- If you don’t pay for more than 90 days, your loan becomes a Non-Performing Asset (NPA).
Once your loan is tagged as NPA:
- It stays on your record for years
- It affects your chances of getting new loans or credit cards
- Recovery Calls and Legal Action
- If you don’t pay for more than 60 days, lenders may:
- Start recovery calls
- Send recovery agents to your home
Take legal action under the Negotiable Instruments Act, 1881
- Long-Term Impact on Future Loans
- A bad credit history and NPA status:
- Reduces your loan eligibility
- Makes it harder to get approval for future credit
- May force you to accept loans with higher interest rates and strict terms
With personal loan defaults still high, especially at private banks, it’s even more important to pay EMIs on time.
