Personal Loan

What Will Happen If a Personal Loan EMI Bounces?


Most loans often come with a provision for equated monthly instalments (EMIs). You become a defaulter if you do not pay your EMI on time. Lenders offer a few solutions to mitigate such risks. The solutions offered depend upon various factors like your CIBIL score and your past payment history with the lender, but there are consequences to missing the payment/EMI due date. So, what happens when you default on personal loan payments?

The article focuses on the consequences of missing a personal loan EMI payment. It discusses the different ways to avoid defaulting. We also provide you with an idea of the short- and long-term consequences of an EMI cheque bouncing. 

However, before delving into the consequences, you must understand the types of defaults.

What are the default types on personal loans?

Most banks and financial institutions categorise personal loan defaults into two types, as follows:

Critical defaults

Major payment defaults occur when you have gone more than 90 days without paying. Lenders will not work with you if you have a default history. A personal loan account is classified as a non-performing account (NPA) when payments are overdue by more than 90 days.

Minor defaults

Personal loan payments delayed by less than 90 days are considered minor payment defaults. In such cases, your CIBIL score will suffer. However, this problem is temporary, as the score can once again increase. You need to make payments on time.

What are the consequences of missing an EMI payment on a personal loan?

Missing a personal loan EMI can affect you in the following ways:

  1. Your CIBIL score may decrease.

The most visible effect of missed personal loan payments is a drop in credit scores. To qualify for a loan from any financial institution, you need a CIBIL score of 750 or higher. If you miss an EMI payment, your credit score can go down. The decrease in your credit score depends on your payment history.

  1. Your creditworthiness decreases.

The credit report includes your payment history and credit score. Personal loan applications with high CIBIL scores are rejected if they include negative remarks. Lenders will classify you as a high-risk borrower if you have negative remarks. These remarks show the lenders your probability of making the EMI loan payment on time.

  1. You have to pay penalties.

Many banks and financial institutions charge late fees. The fee is between 1 and 2% of the total EMI amount. Some institutions may also include other penalties if you default several times. These penalties are mentioned in detail in the original loan contract.

  1. You get a visit from reviving agents.

When the default period on an EMI exceeds 90 days, the financial institution will send an agent to collect the balance. Most lenders give a 60-day warning before the personal loan account becomes an NPA. You will have to pay extra charges if your account becomes an NPA.

So, it is better to avoid such complications and pay your EMI on time.

How do you avoid missing a personal loan EMI payment?

You can use some strategies to ensure that you do not miss your EMI payments. These can help you plan your finances better. Keeping this in mind, here are some solutions that you can consider to prevent delaying payments:

You will need a financial plan.

Devise better financial preparations to reduce the likelihood of delaying the payment of your personal loan EMIMost people know in advance if they can afford the EMI payment in a month. Therefore, you should create a plan and manage your expenses to pay the EMI. With the right plan, you will have fewer chances of defaulting.

You can reduce the EMI.

Talk to the lender about your financial situation if you are worried about missing an EMI payment. Many lenders give their customers a lower EMI by extending the tenure of the loan or by turning an unsecured personal loan into a secured loan.

You can split the pending EMIs into multiple payments.

You can also make pre-payments of your loan to manage your EMIs effectively. It is another preventative measure that you can use to manage EMIs for the loan you have taken. Making pre-payments a regular intervals for your loan is a good option if you have additional income.

You can request a moratorium.

In case your income is delayed, lost your job, are facing a financial crisis due to a medical emergency, have not received wages for the past few months, or have ceased business operations due to unforeseen circumstances, you should immediately contact and discuss your current situation and inability to pay your loan EMIs with your loan provider. You can discuss available options or request a moratorium period.

It is important to be transparent with your lender in such difficult situations so that they can help you with a feasible option.

Personal loans are a great way to finance major expenditures, but your repayment history plays a role in deciding personal loan eligibility.


This article examines the consequences of missing a personal loan EMI. Go through the personal loan EMI plan before selecting a loan.

You can also compare interest rates and EMIs when applying for a personal loan to get the best deal. However, remember that selecting the wrong EMI payment plan can have consequences. Choosing an EMI plan outside of your capacity will affect your CIBIL score and creditworthiness.

Before you make a decision, consult an expert and read all the details. To learn more about personal loans, visit Piramal Finance for more in-depth finance-related articles.