A personal loan is an unsecured credit that you can avail to meet all your financial needs. Whether it’s a medical emergency, shopping, marriage, home renovation, or anything else, the personal loan is good for all your financial requirements. You can repay the loan in fixed EMIs every month. But when you miss your installments, it can bring serious consequences financially and impacts your credit history as well. Some outcomes of missing your personal loan EMIs are listed below in detail.
What If You Miss Your Personal Loan EMIs?
- Decreased credit score: Every time you miss your EMIs, your credit score falls by 50-70 points. Since your credit score decides your eligibility for future loans, you must not miss your payments.
- Lowered creditworthiness: Missing your personal loan EMI will reflect in your credit history. When you apply for any loan in the future, the lender will observe if there were any missed payments of past loans. It will lead to decreased creditworthiness and often a rejection of your loan application.
- Late fees and penalties: Defaulting your personal loan EMIs will definitely attract penalties, late payment fees, and other charges. It’s added in the installment you pay next, and the charges can vary between 1%-2% and more depending on the lender.
- Reduced future borrowing limit: After you miss your EMIs, it is recorded on your credit history. You may see a rejection on your future loan applications, if not, it may also see a lower credit approved for your future loans.
- Recovery agents from the lender: Not just after once you miss the EMI, but if you continue to miss, the lender will appoint recovery agents behind you. They will chase you, trace you and contact you continuously until you pay your dues. It can be really a harsh experience at times.
How to Save from the Consequences of Missing EMIs?
- Plan your finances well: Plan your finances well in advance to be safe from any default in EMIs. Evaluate how much you can easily pay every month after meeting all your monthly expenses with respect to your income.
- Go for smaller EMIs: The smaller the EMI, the longer the loan will stretch, attracting more interest. But, a smaller EMI can save you from being overburdened financially. In the future, if you save a little you can always go for prepayment. It will eventually save you from the additional interest you would have paid otherwise.
- Request for part payment: If you want to reduce your EMI, you can request the lender that you will make a part payment to reduce your EMI amount and reduce your burden.
- Request for an EMI free period: EMI free period is where you don’t pay any EMIs as planned. Lending institutions may offer an EMI free period for a few months if you have lost your job or any other situation that has lowered your income drastically. Based on your finances, you can show your financial position to the lender and request an EMI free period. It will save you from any penalties or hamper your credit history.
Another great alternative is to pay in flexible payments. You can pay in variable installments without having to pay any penalty or additional charges, and this is possible if you have a line of credit from FlexSalary. FlexSalary has a flexible tenure of 3-36 months in which you can repay anytime. So, instead of applying for a personal loan, it is better to choose a line of credit from FlexSalary. You can repay the money at your convenience and avoid the hassle of repaying the money even if you are financially unstable.