Nowadays many people take everything on loan. Car, bike, mobile, furniture or house, everything is available on EMI. This system is very easy but sometimes it gets difficult. Sometimes due to some reason the money is not received and the payment gets delayed. Sometimes the job gets lost, sometimes one falls ill. This causes so many problems which can trouble you both financially and mentally. In this article, we will see what happens if you miss an EMI Payment and how you can avoid these troubles.
1. Late fees are charged
The first loss is the late fee. Every bank or finance company charges a penalty for missing an EMI payment. This penalty varies. If your EMI payment was 10,000 rupees and you are charged a 2% penalty, then you have to pay 200 rupees extra. And if you do not make the payment in the next month also, then you are charged a late fee again. In this way, the late fees increase a lot. This ends your savings. Many people say that they do not even know when the fees increased so much.
2. It is extra interesting
Missing an EMI payment not only attracts a penalty but also extra interest. Every bank has written in its terms that if the payment is late, there will be a daily or monthly interest charge. This interest is different from the normal interest and is charged as a penalty. For example, if your loan is of 5 lakh rupees and you do not make payment for a month, the bank can charge 3% penalty interest. If this delay continues, the interest increases further. Many people think that if you don’t pay for just one month then it is not a big deal. But in reality, you get a lot of interest and penalty for one month. That is why EMI payment should be taken seriously.
1. Daily Interest
If you pay EMI late then the bank charges extra interest daily or monthly which is separate from your actual payment and keeps on accruing every day.
2. Penalty Charge
This penalty interest gets added to your total outstanding amount, making your loan more expensive and repayment difficult.
3. Large amount
For example, if your loan is of Rs. 5 lakh, then for just one month’s delay the bank charges a 3% penalty, which adds up to a lot of money.
3. CIBIL score is falling
The biggest and long-term disadvantage of missing an EMI payment is the fall in CIBIL score. CIBIL score shows your credit history. This score lets banks know how responsible a borrower you are. If you make payment on time then the score improves. But as soon as you miss an EMI, the bank prepares a negative report. This report goes to the CIBIL system. The score decreases. For example, if your score was 750 and you did not make payment for 2 months, then the score can fall to 650 or 600. This is very bad. When you go to take the next loan or want to get a credit card, the bank checks your score.
4. Recovery Calls and Notices are received
When you do not pay EMI, the bank or finance company reminds you. First of all SMS and emails are sent. If even then the payment is not made, recovery calls start coming. In some cases, there are 3-4 calls in a day. You are asked to make payment in every call. These calls trouble many people. It is written in the notice that if you have not made the payment and do not pay the money soon, action will be taken. Some people get so stressed by these calls and notice that their mental peace is lost. There is only one way to avoid this stress: pay the EMI on time.
5. Legal action can also be taken
If EMI is not paid for a long time then the bank starts the legal process. In unsecured loans, the bank can file a civil case against you. The case goes on in court. This process is long and troublesome. If you want to avoid legal action then take EMI payment seriously and do not ignore it.
6. Mental stress increases
Missing an EMI payment not only leads to a loss of money but also mental tension. Everyday we get calls, notices and reminders from the bank. Even the family members get to know that the payment is late. Seeing all this causes stress and anxiety. Many people go into depression. They cannot sleep. Every day they keep thinking about where they will get the money from. Often the atmosphere of the house also becomes bad. That is why financial discipline is very important. Always make a budget and keep the EMI payment money separate. In case of any problem, talk to the loan provider and make a plan. But never ignore the payment.
7. It is solid to get a future loan
If your CIBIL score falls and your record becomes bad, then it becomes very difficult to get the next loan. Banks and NBFCs consider you a risky borrower. Sometimes when you apply for a loan, your credit report is checked first. If it is written in it that you missed an EMI payment or made a settlement, then the bank rejects the loan. Even if you get the loan, the interest rate is very high. Normally, a car loan is given at 10%, but those with bad records get it at 15% or 18%. This is a big loss for you.
There is an option of settlement but there are disadvantages too
Sometimes if the borrower is unable to make the payment then the bank offers a settlement. Settlement means that the bank takes less money from you and closes the loan. Like if you had to pay 1 lakh rupees, the bank can say that you can pay 80,000 and close the loan. Many people get happy hearing that they have to pay less money. But in reality, it spoils your credit history even more.The record of settlement remains in CIBIL for 7 years. There is a lot of difficulty in taking the next loan. Many companies even reject the loan.For this, consider settlement as the last option. When there is no other way then only think of this option. First talk to the bank and ask for a flexible repayment plan.
What is Settlement?
Sometimes, if the borrower cannot pay, the bank offers a settlement option.
Example of Settlement:
For example, if you had to pay 1 lakh rupees, the bank may agree to accept 80,000 rupees and mark the loan as settled.
It Affects Credit History:
Even though it feels good to pay less, settlement damages your credit report. It shows you did not repay fully.
Conclusion
Recovery calls, legal notices and stress all together make your life difficult. It becomes difficult to take out a loan in the future. If you want to never miss an EMI payment, always manage your budget properly. Keep the EMI money aside every month. If any emergency arises, contact the bank immediately and explain the situation to them. Only good financial planning and timely payment can save you from this trouble. Keep your credit history clean, give priority to EMIs payment and do not let your mental peace be lost. From today, promise to keep a proper record of your loans and EMIs payment.