What Happens if Personal Loan EMI is Not Paid?

Hi Animesh. As a loan officer at a private bank, I can tell you what happens if personal loan EMI is not paid. Four major things occur upon delayed or nonpayment of EMIs. Upon missing out on your loan EMI payment, the lender can file legal action against you. The second that will happen is that it will affect your finances due to an increase in debt. I’ll share the rest in the next section.

What will Happen if Personal Loan EMI Not Paid

Here are some consequences of non-payment of loan EMIs in India:

1. The major hit will be taken by your credit score as delayed or nonpayment reflected in your credit report. It will present you as an unfit applicant for future loans. It reduces creditworthiness.

2. Banks and NBFCs have a strict system of levying additional interest upon delayed and nonpayment of loan EMIs. This will lead to an increase in your overall loan cost. The interest will keep on compounding with every missed/delayed payment.

So, how can you avoid these consequences associated with defaulting on your EMIs? Let me tell you below.

1. Talk to your lender and explore options to reduce the EMI by increasing the tenure.

2. You can consider taking a top-up loan to manage finances, given you’ve not defaulted on EMI payments already.

This is all I have to share with you regarding what happens if personal loan emi is missed. I hope this turns out to be useful for you.

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How to Pay Extra EMI for Personal Loan?

I took out a personal loan last year and always make sure to pay them on time. However, just out of curiosity, I wanted to know what happens if personal loan EMI is not paid on time. I started doing some research and learned that one of the biggest problems that raises is the dip in credit scores. Not paying EMIs on time affects your credit score by a lot. 

What Happens if Personal Loan EMI is Missed?

As I mentioned above, your credit score is affected when you don’t pay your EMIs on time. When that happens, lenders think you are not creditworthy and are less likely to provide you with a loan. Here are a few more things that I have learned.

Additional Interests and Penalties

Not paying your EMI on time quite results in lenders penalising you with additional interest. This‌ increases the overall cost of your loan. Delayed payment keeps on adding to this amount, thus increasing your financial strain.

Health Impact

Another result of missed EMI is debt traps. These may look like nothing at the beginning, but over time, it affects your financial well-being. This can lead to stress, which can affect your mental and physical health.

Legal Action

Repetitive missing EMIs can lead to lenders taking legal action against you. This could also lead to court proceedings. 

This is what will happen if personal loan EMI not paid on time. And that is all that I have learned. I hope this helps.