Personal loan EMI missed? THESE 5 consequences could cost you big

Household debt is continuing to climb in the country and the defaults in the retail segment are also rising. Keeping these factors in mind, missing out on your personal loan EMI is a serious financial misstep.
To combat the same challenge the Reserve Bank of India (RBI) has urged borrowers to stay vigilant and inculcate responsible borrowing habits.
1. Credit score plunge: Even a single EMI missed can hit your credit score by 50 to 70 points. This drop may raise interest rates or block new credit applications. It also leaves a negative mark on your overall credit profile. That is why do ensure that you never miss your personal loan EMIs.
Karamjeet Singh, Lead - Credit Policy, HDB Financial Services, says 'Besides incurring penal charges and overdue interest, it can negatively affect your credit score and trigger a potentially inconvenient debt collection process initiated by your financier. A damaged credit score could also impact your ability to borrow in the future.'
2. Penalty charges & interest accumulation: Financial institutions such as banks and NBFCs generally charge 1–2 % of the EMI as a late fee. Further, overdue EMIs attract penal interest, compounding the debt. These developments can result in serious escalation of costs.
Bhushan Padkil, SVP & Head, Direct to Consumer Business, TransUnion CIBIL, stated that 'Missed EMIs can significantly impact your credit score and reflect poor repayment behaviour. Consistent repayment track record enhances creditworthiness and access to better credit opportunities. Make sure you monitor your CIBIL score and credit profile regularly to ensure you are credit-ready.'
3. Minor vs major default: NPA classification: It is crucial to keep in mind that missing out on payments for under 90 days is a minor default. Beyond that, the personal loan turns into a Non Performing Asset (NPA). It is then flagged by both credit bureaus and banks. Once categorised as NPA your loan record remains tainted for several years and creates complications with future personal loan and credit card applications.
4. Recovery calls & legal action: Recovery calls, legal actions are generally initiated after 60 days of missed dues. Borrowers may have to face recovery agents at their doorsteps. Continued default can result in legal proceedings under the Negotiable Instruments Act, 1881.
5. Long‑term impact on borrowing capacity: A constantly deteriorating credit score along with NPA listing can easily hurt future loan eligibility of an individual. With personal loan defaults still elevated among private banks borrowers might struggle to get new credit or only be able to secure new loans with very high interest rates along with non flexible repayment terms and conditions.
Action Benefits Automate EMIs Avoid missed payments entirely Talk to your lender Request EMI restructuring or moratoriums if cash‑strapped Build an emergency buffer Covers EMI for tough months and secures repayment consistency Check your credit report Spot unreported defaults and correct errors promptly
Therefore, borrowers must treat EMIs as sacrosanct. Maintaining timely payments is vital not only for personal credit but also for the nation's economic health.
Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Business Standard

31 minutes ago

• Business Standard

RBI relaxes PSL norms to help SFBs de-risk, diversify loan portfolio

The Reserve Bank of India's (RBI's) relaxation of priority sector lending (PSL) norms for small finance banks (SFBs) — reducing the overall PSL target from 75 per cent to 60 per cent — will provide operational flexibility to these lenders, enabling them to diversify and derisk their loan books by venturing into segments they had previously stayed away from. This regulatory dispensation is expected to free up around ₹40,000 crore for SFBs, which can now be deployed in lower-rated risk, secured assets, said industry players and experts. With the relaxation, SFBs can channel funds into segments such as loans against property (LAP), personal loans, vehicle loans, and loans against mutual funds, they added. According to RBI regulations, an SFB was required to extend 75 per cent of its adjusted net bank credit (ANBC) to sectors eligible for classification as PSL. While 40 per cent of the ANBC was to be allocated to different sub-sectors under PSL in line with the extant PSL prescriptions, SFBs were allowed to allocate the balance of 35 per cent to one or more sub-sectors where they have a competitive advantage. Now, the RBI has said that the additional component (35 per cent) of PSL will be reduced to 20 per cent, making the overall PSL target 60 per cent of ANBC or the credit equivalent of off-balance sheet exposures, whichever is higher. According to Ajay Kanwal, managing director (MD) and chief executive officer (CEO) of Jana SFB, the RBI's relaxation of PSL norms is likely to benefit those banks that may have felt constrained by the earlier requirements. With greater flexibility, these banks could now see an opportunity to diversify their loan books. 'The eased norms may encourage more non-banking financial companies to consider applying for an SFB licence. That said, we do not foresee any immediate impact on our profit and loss (P&L) from this regulatory change,' he said. Some of the areas where SFBs can now beef up lending are automobile loans, LAP, loans against shares, and personal loans. While diversification may not come into play in the current financial year (2025–26/FY26), going forward, the banks can now plan for the next two to three years on how they will diversify their business with the extra room that the RBI has provided, said bankers. According to R Baskar Babu, MD and CEO of Suryoday SFB, the diversification in loan books will pave the way for SFBs to prepare themselves for converting into universal banks. While diversification in the loan book will not necessarily mean higher margins, it would certainly provide comfort on asset quality, as most SFBs have a sizeable microfinance portfolio that gets impacted due to various reasons at regular intervals. The regulator has already announced a norm for SFBs that can be eligible to voluntarily convert into universal banks. Currently, there are 11 SFBs in the country, and three of them have applied for conversion. 'This is the vision the RBI had while issuing the differentiated SFB banking licences. This will help add new asset classes and new geographies for the SFBs,' said Inderjit Camotra, MD and CEO of Unity SFB. 'It will enable SFBs to deploy this 15 per cent towards diversifying their present base,' he said. The new norms, which come into effect from the current financial year (FY26), would aid SFBs in earning profit by selling priority sector lending certificates (PSLCs) in the small and marginal farmer segment to other banks that fall short of the target. Under the 40 per cent mandatory PSL target, banks are required to allocate funds to sectors such as agriculture, small and marginal farmers, non-corporate individual farmers, microenterprises, and weaker sections. While most of these segments do not yield sizeable profit through the sale of PSLCs, the small and marginal farmer segment offers some profitability, which SFBs can now strategically leverage to earn extra income. 'The relaxation in PSL norms for SFBs by the RBI provides these banks with greater operational flexibility to diversify their loan books. According to our estimates, around 15 per cent — or over ₹40,000 crore — could be freed up for deployment in lower-rated risk assets, potentially improving their cost of funds. However, this move is unlikely to have a major impact on their P&L in the near term,' said Sanjay Agarwal, senior director, CareEdge.

Time of India

an hour ago

• Time of India

Transforming Credit Delivery in India: The Unified Lending Interface Meeting, ET LegalWorld

The officials of the finance ministry and the Reserve Bank held a meeting with various stakeholders, including state government representatives, on ways to scale up Unified Lending Interface (ULI) as it has the potential to transform the credit delivery mechanism. ULI is a new digital public infrastructure (DPI) designed to streamline the lending process, similar to UPI in the payment space. It is a technology platform built to facilitate easy access to authenticated data from various sources, through standardised APIs to which all lenders can connect seamlessly through a 'plug-and-play' model. Advt Advt ULI will make frictionless credit available to every Indian, and to further the government's broader vision of digital empowerment, financial inclusion , and last-mile service delivery, the finance ministry statement Services Secretary M Nagaraju and RBI Deputy Governor T Rabi Sankar co-chaired a meeting attended by senior officials of 13 departments and 11 state governments, among is envisioned as a DPI for credit delivery designed to integrate technology, data, and policy into one seamless platform, Nagaraju UPI revolutionised the payment ecosystem, the ULI is poised to transform credit delivery, making it inclusive and redefine how credit is accessed and delivered across India, he rich, trusted and high-value datasets available with the Central government ministries/departments and state governments, when leveraged appropriately by lenders, can power data-driven, inclusive, and faster lending, especially for underserved the meeting, the RBI Deputy Governor highlighted that ULI is a DPI of national importance and urged the participants to onboard their datasets on the platform to tap into its potential, it Deputy Governor also pointed out that the ULI has the potential to surpass the transformative impact of urged the stakeholders to nominate nodal officers for fast-tracking the integration of government datasets with ULI in order to make ULI India's next UPI on the credit also emphasised that appropriate integration of various separate similar initiatives operating to serve specific purposes with ULI for deriving synergy to build a unified and resilient national lending ecosystem, while preserving their identity. Join the community of 2M+ industry professionals. Subscribe to Newsletter to get latest insights & analysis in your inbox. All about ETLegalWorld industry right on your smartphone! Download the ETLegalWorld App and get the Realtime updates and Save your favourite articles.

The Print

an hour ago

• The Print

Never stop questioning status quo, keep learning: RBI Guv Malhotra to IIT students

Malhotra recalled his days at IIT Kanpur and sounded nostalgic as he even mentioned his roll number while delivering the address at the 58th convocation of the institute. An alumnus of IIT Kanpur, Malhotra also emphasised that trust is the foundation on which any relationship is built, whether it is marriage, friendship, or at the workplace – between the CEO and the employees, or between a company and its consumers. Kanpur, Jun 23 (PTI) Never stop questioning the status quo and keep learning because karma largely determines outcomes, RBI Governor Sanjay Malhotra said on Monday as he went down memory lane and shared his thoughts with IIT students. As a fellow alumnus, roll number 85213, who has experienced life after campus, Malhotra said there are four learnings from his journey — learning for life, questioning the status quo, pursuing virtuous karma and trust. 'Remember that learning is for life. The moment one is not learning, it is a signal that one is not growing; one is not advancing. It is knowledge which will keep you ahead of others…,' he said. He is a graduate in Computer Science and Engineering from the Indian Institute of Technology, Kanpur, and a Master in Public Policy from Princeton University, USA. Malhotra, an Indian Administrative Service Officer of the 1990 batch, Rajasthan Cadre, took charge as the 26th Governor of the Reserve Bank of India on December 11, 2024. Immediately prior to this appointment, Malhotra was Secretary, the Department of Revenue (DOR) in the Ministry of Finance. 'Dear graduates, it is a special day for you as you enter a new and exciting phase of life. It is an equally special day for me and doubly so. First, this institute has had a transformational impact on me, my life and my thoughts. 'I remember with nostalgia my years at IIT. I still vividly remember my first day at IIT when my mother came to drop me with another batchmate,' he said. He further told the passing students that with a degree from a prestigious institute and a good job in hand, please don't think that you have arrived. 'The moment you think you have arrived, you will stagnate. The moment you believe you know everything, you will stop growing,' he said. Malhotra advised the graduating students to have confidence in themselves. 'Your journey of transformation began here at IIT Kanpur. Now, transform the world as leaders who are trustworthy; who continue learning for life; who question the status quo and who pursue virtuous karma,' the governor said. Malhotra has vast and diverse experience across various key sectors, including power, finance and taxation, and information technology, and has held key positions both at the state and the central government, apart from having a stint with a United Nations agency. He was also Chairman and Managing Director of Rural Electrification Corporation Limited. Malhotra served on the Central Board of the Reserve Bank of India as a government nominee director from February 16, 2022, to November 14, 2022. PTI NKD RAM NKD BAL BAL This report is auto-generated from PTI news service. ThePrint holds no responsibility for its content.