We’ve been witnessing a exponential rise in the number of individuals opting for personal loans to make it big & own expensive items for the near & dear ones. Ofcourse, personal loans are gaining importance due to its major advantages like low documentation and instant disbursement. Also, instant loans come with flexible tenure between 5 to 20 years & EMI payments.
However, despite flexible tenures & what not, a borrower may still face issues to repay the EMIs on time. Though, missing on a few EMIs may not have a huge impact but it does leave your credit score affected.
Let’s have a look at the consequences of missing an EMI payment:
- CIBIL Score
The primary most consequence of missing a payment is lowering your credit score. Major banks/ financial institutions require a CIBIL score of over 750 or more to be eligible for a personal loan. And missing even a single payment can result in dropping the borrower’s credit score by a few points.
- Credit worthiness
Besides the credit score, a borrowers credit record is equally to assess their repayment capabilities. Often if your CIBIL score is above 750, your credit history can put a stop to your personal loan application. If not all, a few lenders mark these comments as glitches & categorize these borrowers as risky who not be able to meet repayment terms of the loan.
- Penalties
Many banks and financial institutions impose late fees and penalties for individuals who miss their EMI payments every month. Though, the amount keeps changing, but usually stays at 1-2% of the due EMI.
- Recovery agents
In an extreme case, the bank guys send agents to get their amount recovered soon. This happens usually when the loan period exceeds 90 days or more. It starts with the bank initially issuing a 60-day notice to the borrower before the loan account is declared as NPA. Since, this situation is stressful so it’s best to avoid it & stay stress-free.
How to avoid loan defaults?
It’s obviously not a good idea to have loan defaults, so it’s best to find out ways to avoid it. The suggestive ways are generally to thought out keeping in mind that the borrower knows his incapacity to make repayments. Below are the options that a borrower can probably consider:
- Plan your money better
To avoid loan defaults, it’s advisable to plan finances as efficiently as possible, at all times.
- Opt for lower EMI
If there’s a possibility of the loan repayment failure, then then you better inform your bank about the current financial crisis and check for a lower EMI. Banks/ financial institution may lower EMIs by increasing the existing loan tenure or converting the loan into a secure one. Opt for the second option to reduce your interest amount & thereby the overall loan. This also reduces the EMIs as compared to longer loan tenures.
In addition, you can also choose part payments or request for an EMI free period.
We understand that personal loans are an amazing means of financing hefty purchases, an individual’s credit record plays repayment plays an instrumental role to determine future loan eligibility.