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What Happens If You Don’t Pay Your Personal Loan EMI on Time?

Personal loans are a convenient form of funding for salaried and self-employed individuals. If you have a good credit score, you can apply for an online personal loan to get your required funds quickly and easily.

However, before applying for a personal loan, analysing your repayment capacity and working out a suitable repayment schedule is essential.

Suppose you borrow more than your repayment capacity or choose a repayment schedule that does not work for you – in that case, you may default on your EMI payments. Missing an EMI payment or making more than one late payment for your EMIs has long-term consequences for you.

Whether you take out a personal loan up to one lakh or need to borrow a higher amount, it is crucial to assess your repayment capacity beforehand. Use an online calculator to determine the suitable loan and EMI amounts based on your earnings and savings. Choose an EMI amount that aligns with your ability to repay.

Here is a Look at What Happens If a Personal Loan is not Paid in India – 

Failing to pay your EMI on time has several consequences, especially for your credit record. We must first look at the different kinds of defaults to understand the adverse effects of loan defaults.

Classification of Loan Defaults

  • Major Defaults – A major default occurs when borrowers do not pay their EMIs for 90 days or more. Most financial institutions deem anyone with one or more significant defaults on their credit record as ineligible for further loans. If a bank has a borrower with a major default, they mark that account as a ‘non-performing asset’ or NPA.
  • Minor Defaults – Any loan payment wherein the non-payment period is less than 90 days is called a minor default. Suppose a borrower has a minor default on their record. In that case, they can recover from it by ensuring the remaining EMIs are all paid on time.

Consequences of Missing Personal Loan EMIs

1. Impacts Credit Score Negatively

One of the most severe results of non-payment of EMIs is the negative impact on your credit score. Credit rating agencies in India keep track of bills and loan payments to create a credit report for every borrower.

They use four parameters to determine your credit rating:

  • Number of timely repayments 
  • Number of late repayments
  • Number of loans availed in the past
  • Summation of the credit amount you have used

2. Additional Fees & Late Fees

Your lender may charge you an additional fee or penalise you with late payment charges if you delay your EMI payment. The additional costs and late payment charges may add up to a significant loss for you if you delay the repayment of your personal loan EMIs.

Some lenders also have a policy of adding a higher-interest constituent on your due component as soon as you miss your payment due date.

Sometimes lenders may file a civil lawsuit against a loan defaulter with a major default on repayment. When several attempts have been made to recover the loan amount from the borrower with no avail, the lender may be forced to file a civil lawsuit.

But as this is a financially taxing and time-consuming solution, lenders tend to avoid it until the end. Even though legal action is a last resort for a borrower, and it is a rare occurrence – borrowers should be aware of the legal implications of non-payment.

4. Harassment by Recovery Agents

If a lender decides to classify your account as a non-performing asset, they are liable to send you a 60-day notice. Within these 60 days, you can attempt to repay the due amount with the late payment fees.

However, if you do not do that, lenders may send recovery agents to visit you at your residence or workplace. The job of these recovery agents is to collect the due amount from defaulters. 

5. Reduced Credibility

The repayment history of all financial instruments is carefully captured, analysed, and stored with credit rating agencies for future reference. Suppose you have defaulted on your payments with one personal loan the next time you apply for a loan.

In that case, prospective lenders can see your records to judge your credibility. You should pay all your current EMIs on time to get quick approvals on future loan applications.


There are several adverse consequences of missing the timely payment of your personal loan EMIs. Before taking out a loan, ask your lender what happens if an EMI is not paid on time. They will explain the consequences to you, and you can keep that in mind when selecting the best loan option for yourself.

Always choose a loan amount within your repayment capacity and design the repayment schedule according to your convenience. That way, you can avoid defaults on EMI payments and maintain a strong credit record.

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