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Life throws all kinds of curveballs at us. Unfortunately, we aren’t all professional batsman to score a hit every time, correct? One such curveball can be defaulting on your personal loan. Now, this can happen for any given reason, ranging from lack of funds to simply forgetting to pay on time, but the solution is to always take action sooner than later.
If you are someone who has missed an EMI payment recently or are struggling to pay your loan, it’s important to know the steps you should take in order to prevent your debts from spiraling out of control. However, before doing that let’s learn about what happens if you miss an EMI.
EMI or Equated Monthly Installments are one of the most popular and ideal payment methods to clear off an outstanding loan within a stipulated time-frame. However, such loans come at relatively higher interest rates. Therefore, it’s advisable to always calculate the EMI amount on a personal loan EMI calculator. This will help you understand the amount you will have to pay each month against the principal for specified loan tenure.
Now, if for some reason, the funds in your account are insufficient, then your EMI will not be debited successfully on the due date. This is when you will receive a reminder in the form of a notification on your email or a call from the bank informing you to clear your dues. In many cases, the bank offers a grace period during which you can clear your EMI. Following your grace period, the bank will begin charging you for late payment. You will only be added to the defaulter’s list if you miss paying your EMI for three months or 90 days.
Credit score: Any instance of missing out on EMI payments will lend a bad impression on your repayment history. The bank will report a default to the credit bureaus and this will reflect negatively on your credit score too.
Higher interest rates: Once you become a defaulter, the chances are that the bank may start charging a higher interest rate on your personal loan, as you will be considered a risky borrower.
So, if you ever find yourself in a tight spot like this, here are a few things you must do:
While you do have these options at your disposal, the best thing to do is to build an emergency fund. So when you see a curveball coming at you, you know exactly how to spin your bat.
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