Personal Loans are a popular type of unsecured loan that are offered without any kind of end-use restrictions. You can take out such loans to travel abroad, make expensive purchases, consolidate debts, and more. Paying personal loan EMI is also fairly easy and can also be done online. Furthermore, personal loans tend to have a flexible repayment schedule and are disbursed fairly quickly, which adds to the appeal.
However, just because these loans are easily available does not mean you should apply for it without proper thought and planning. After all, much like any other loan, you have to pay EMI for these loans on time.
Please remember to take into account your financial standing and loan affordability and take out such loans only when you need them. Unless you do not plan your finances properly, there is a chance that you will end up in a financial mess that can result in defaults in EMI repayment.
There can be many situations due to which you might not be able to pay EMI for a personal loan in time, such as the loss of a job, a medical emergency, sudden financial struggles in the family, and more. You must be proactive about discussing the condition with your lender. They might be willing to provide support and suggest appropriate options for dealing with EMI payments. However, if the lender has stringent repayment terms, you might face certain consequences for defaulting on your payment.
Defaulting on EMI payments is not a crime. However, there are some consequences you might face if you do not pay personal loan EMI on time:
• Impact your credit score: Financial intuitions report default EMI payments to credit bureaus like CIBIL and Equifax. Your credit score will be impacted negatively and a low credit score can lower your chances of getting good loan offers, or loans altogether in the future.
• Impact on your guarantor or co-signer: A lender might try to recover missed payments through a guarantor or co-signer, if you nominated one during your application. They shall receive reminder calls to recover the personal loan sum.
• Penalties and extra charges: Lenders can levy certain extra charges or penalties on default or late EMI payments of personal loans.
• Loss of collateral: While personal loans are unsecured loans, lenders may ask for collateral against the credit in case you have missed multiple EMI payments or are not able to repay the loan.
• Increase in Interest rate: The lender might charge a higher interest rate on your loan sum in case you do not make EMI payments in time.
You should try your best to make EMI payments on time to avoid such negative consequences. If you are unable to do so, you must at least make an effort to give customer care a call and let your lender know about your financial struggles: they will surely help you out with a restructured repayment plan. You can ask them for more time to make the payment or request your loan to be restructured by reducing the EMIs and increasing the tenure.