What Happens When You Miss EMI Payments?

Missing an Equated Monthly Instalment (EMI) means failing to pay your scheduled monthly loan repayment by the due date. While a single missed EMI may feel like a small slip, it can gradually impact your finances if not addressed in time.

Missing EMIs can lead to additional charges, affect your credit score, and increase your overall repayment burden. However, with timely awareness and corrective actions, you can minimise the impact and regain financial control. This article explains what happens when you miss an EMI payment, the possible consequences, and practical steps to prevent or manage such situations effectively.

Also Read: Understanding Loan Repayments: A Simple Guide for Borrowers

What Happens If EMI is Not Paid on Time

1. Immediate Impact on Your Credit Score

Missing an EMI payment immediately reflects on your credit report and can reduce your credit score. Lenders view repayment behaviour as the strongest indicator of creditworthiness, and even a single missed EMI can trigger a negative mark.

How It Affects You:

• Lower Credit Score: A missed EMI can drop your score by 30–100 points depending on existing credit health.
• Impact on Future Loans: You may face higher interest rates, stricter eligibility checks, or rejection of loan/credit card applications.
• Recovery Timeline: Timely payments over the next 3–6 months can gradually repair the impact, but repeated delays can create long-term damage.

2. Late Payment Fees and Penalties

When you miss an EMI, lenders impose late fees and penalty charges. These costs accumulate if the overdue EMI is not cleared quickly.

Typical Charges (Indicative Ranges):

• Late Payment Penalty: Usually 1% to 2% of the EMI amount.
• Penalty Interest: Some lenders charge an additional 2–4% per month on the overdue amount.

• Interest Accumulation: Interest continues to accrue on the unpaid EMI, increasing your overall outstanding.

What Users Should Know:

Delaying multiple EMIs can cause the outstanding amount to grow rapidly, leading to financial strain.

3. Potential Legal Consequences

If you continue to miss EMIs for an extended period, the loan moves into the “default” category, which has serious implications.

Timeline Triggers:

• 30 Days Overdue: Account marked as Special Mention Account (SMA-1).
• 60 Days Overdue: Categorised as SMA-2.
• 90+ Days Overdue: Account becomes an NPA (Non-Performing Asset), triggering legal/collection actions.

Possible Outcomes:

• Loan Default: Lender may initiate recovery proceedings as per RBI guidelines.
• Asset Repossession: For secured loans like home loans or LAP, lenders can legally repossess or auction the property to recover dues.
• Legal Notices: Borrowers may receive collection notices or court notices for persistent default.

4. Impact on Loan Tenure and Total Cost

Missing EMIs affects the overall loan structure. Lenders may extend your tenure or adjust future EMIs to cover the overdue amount.

Key Consequences:

• Extended Loan Tenure: The lender may push the repayment period further, increasing total interest payable.
• Higher Total Interest: Even one missed EMI can add significant interest over the remaining loan period.

Example for Clarity:

If you miss one EMI of ₹20,000 on a 10-year loan at 10% interest, the total added interest could be ₹8,000–₹12,000 over the tenure.

Using an EMI recalculation or loan amortization calculator can help borrowers understand the actual impact.

5. Damage to Your Relationship with Lenders

Consistent EMI delays weaken your credibility as a borrower, making future borrowing more difficult.

How This Affects You:

• Stricter Loan Terms: Higher down payments, higher interest rates, or more documentation.
• Reduced Access to Credit: Credit cards, overdraft facilities, and top-up loan approvals may get declined.
• Limited Negotiation Power: Lenders may refuse requests such as restructuring EMIs, increasing tenure, or granting moratorium options.

Maintaining a good repayment record helps build trust and ensures long-term credit flexibility.

What If You Miss Multiple EMIs?

Missing multiple EMIs can escalate a simple delay into a serious financial issue. While one missed EMI may cause temporary inconvenience, repeated overdue EMI payments can lead to heavy penalties, loan default, and long-term credit challenges. Understanding the consequences helps borrowers take corrective action early and avoid severe outcomes.

Key Consequences of Missing Multiple EMIs

• Higher Penalties and Accumulated Charges

Each missed EMI adds late fees, penalty interest, and additional charges, causing your overall outstanding to increase rapidly.

• Severe Credit Score Drop

Multiple missed EMIs can significantly reduce your credit score, making it difficult to qualify for future loans or credit cards.

• Loan Classified as Default (90+ Days Overdue)

When EMIs remain unpaid for more than 90 days, the loan may be marked as a Non-Performing Asset (NPA), triggering recovery actions.

• Increased Risk of Legal Action

For secured loans like home loans or LAP, lenders may initiate legal proceedings or begin the process of repossessing the property.

• Reduced Eligibility for Future Credit

Lenders may view you as a high-risk borrower. This can lead to stricter approval conditions, higher interest rates, or rejection of new loan applications.

• EMI Restructuring Becomes Difficult

Once your repayment record deteriorates, negotiating for deferred EMIs, restructuring, or temporary relief becomes more challenging.

• Impact on Co-Borrowers and Guarantors

If someone has co-signed or guaranteed your loan, their credit score and financial responsibility are also affected.

• Continuous Stress on Monthly Finances

Outstanding EMIs accumulate, leading to more financial pressure and difficulty catching up, especially with added interest.

Steps to Take After Missing an EMI Payment

If you have missed an EMI payment, it’s crucial to act quickly to mitigate the damage:

Missing an EMI can lead to overdue charges, affect your credit score, and create financial stress. However, taking quick and informed actions can help you minimise the impact. Here are practical steps to recover from a missed EMI payment:

1. Contact Your Lender Immediately

Reach out to your lender as soon as you realise you’ve missed an EMI. Explain the reason for the delay—they may offer flexible solutions such as rescheduling EMI dates, offering a short moratorium, or allowing a revised repayment plan. Quick communication can prevent the overdue amount from escalating.

2. Pay the Outstanding EMI and Penalties at the Earliest

To reduce the impact on your credit score, try to clear the missed EMI along with the applicable late fees as soon as possible. The sooner you repay the overdue amount, the lower the chances of long-term consequences.

3. Consider Loan Restructuring

If you expect continued financial difficulty, ask your lender about loan restructuring. This may involve extending the tenure, reducing the EMI amount, or temporarily switching to interest-only payments. It helps manage cash flow while staying on track with loan repayment.

4. Use Savings or Emergency Funds

If you have emergency savings, this may be the right time to use them. Clearing your missed EMI overdue payment immediately prevents further penalties and protects your credit score.

5. Pay Partial EMIs If Allowed

Some lenders accept partial EMI payments in exceptional situations. Even contributing a portion reduces the outstanding amount and shows repayment intent.

6. Explore Debt Consolidation

If you’re struggling with multiple EMIs, consolidate them into a single loan with a lower interest rate. This simplifies repayment and reduces the chances of future missed payments.

7. Automate Your EMI Payments

After resolving the overdue, set up auto-debit or standing instructions to avoid missing EMIs in the future. This ensures timely payments and keeps your credit history clean.

8. Reassess Your Monthly Budget

Review your expenses to make space for mandatory EMIs. Cutting down on discretionary spending can help prevent future overdue situations.

9. Increase Your EMI Buffer Fund

Create a small buffer fund specifically for EMIs. Even one month’s EMI saved separately can help you avoid missing payments during financial disruptions.

10. Seek Professional Financial Advice

If you’re unsure about the next steps, consult a trusted financial advisor. They can help you understand what happens if we miss EMI, assess long-term implications, and create a repayment strategy tailored to your financial situation.

How to Avoid Missing EMIs in the Future

To prevent a missed EMI payment or missed EMI overdue payment in the future, you can follow these simple and effective steps:

• Set Up Auto-Debit or Standing Instructions

Automating your EMI payments ensures bills are deducted on time, reducing the risk of human error or forgetfulness.

• Maintain an EMI Buffer Fund

Keep at least 1–2 months of EMI amount in a separate savings fund. This acts as a safety net during emergencies or unexpected expenses.

• Choose a Suitable EMI Date

Align your EMI date with your salary credit cycle. Ensuring funds are available in your account on EMI day reduces the chances of default.

• Track Your Monthly Cash Flow

Regularly monitor your expenses to know exactly how much you can allocate towards loan repayment each month.

• Set Payment Reminders

Use mobile apps, calendars, or SMS alerts to remind yourself of upcoming EMI due dates.

• Avoid Taking Multiple Loans at Once

Too many EMIs can strain your budget and increase the possibility of a missed EMI payment.

• Opt for a Longer Tenure If Needed

A slightly longer tenure reduces your monthly EMI burden, making repayment more manageable and consistent.

• Review and Cut Unnecessary Spending

Reduce discretionary expenses so you can prioritise essential payments like EMIs.

• Keep Your Account Funded Before the Due Date

Ensure adequate balance is available in your bank account one day before the EMI deduction date to avoid rejection.

• Increase Your Income Sources

Consider part-time work, freelancing, or passive income options to build a stronger financial cushion.

• Regularly Review Loan Statements

Keep an eye on your loan statements to ensure everything is updated, accurate, and aligned with your repayment schedule.

Missing an EMI payment is not the end of the world, but it is a situation that needs to be addressed promptly to avoid long-term financial damage. The key is to stay proactive, communicate with your lender, and explore available options to get back on track. By understanding the consequences and taking appropriate action, you can mitigate the impact and protect your financial health.

Also Read: How Does 'Design Your EMI' Provide Flexibility in Loan Repayments?

To understand and read more about loans visit our knowledge centre. If you’re looking for funds and don’t know where to start, try using an EMI calculator to evaluate your payable and you can accordingly apply for a loan.

Also Read: How EMI Calculators Simplify Loan Evaluation and Budget Planning?

FAQs

Q.1. How many missed EMI payments will affect my credit score?

A. Even a single missed EMI payment can negatively impact your credit score, making it crucial to pay on time to maintain a healthy credit profile.

Q.2. Can I negotiate with my lender after missing an EMI payment?

A. You can contact your lender to discuss options like rescheduling EMIs, restructuring the loan, or temporarily deferring payments.

Q.3. Will missing an EMI payment lead to legal action?

A. If you consistently miss payments, the lender may initiate legal action or repossess collateral in the case of secured loans.

Q.4. Can I avoid late payment fees if I miss an EMI?

A. Generally, late fees are unavoidable, but discussing your situation with the lender may help you find alternative solutions.

Q.5. How long will it take to recover my credit score after a missed EMI?

A. Recovering your credit score can take several months of consistent, on-time payments, depending on the extent of the missed payments.

Q.6. What is an overdue EMI payment, and how is it different from a missed EMI payment?

A. An overdue EMI payment refers to an EMI that was due but not paid by the deadline. A missed EMI payment happens when the EMI remains unpaid even after the grace period. Overdue eventually becomes a missed payment if not cleared on time.

Q.7. What is the penalty for late payment of EMI?

A. Lenders may charge a late payment fee, penal interest, or both when you miss an EMI. The penalty varies by lender and loan type but usually ranges between 1%–3% of the overdue EMI amount for each month of delay.

Q.8. Can I request EMI rescheduling or loan restructuring after missing payments?

A. Yes, if you’re unable to pay on time, you can request EMI rescheduling or loan restructuring. Lenders may offer options like extending tenure, reducing EMI, or offering temporary relief based on your repayment history and financial situation.

Q.9. Will missing EMI payments affect my eligibility for future loans?

A. Yes. Missing EMIs can lower your credit score, showing lenders that you may be a risky borrower. A lower score can affect your ability to get new loans or credit cards and may result in higher interest rates on future borrowings.

Q.10. Is late payment fee the same for personal loans and secured loans?

A. No. Late payment fees vary across loan types. Personal loans often have higher penalties due to being unsecured, while secured loans like home or car loans may have comparatively lower late fees. The exact charges depend on each lender’s policy.

Disclaimer:

The content presented on this page, including images and factual information, is intended solely as a summary derived from publicly available sources. GHFL/GFL (“Company”) does not claim ownership of such information, nor does it represent that the Companies have exclusive knowledge of the same. While efforts are made to ensure accuracy, there may be inadvertent errors, omissions, or delays in updating the content. Users are strongly encouraged to independently verify all information and seek expert advice where necessary. Any decisions made based on this content are solely at the discretion and responsibility of the user. Godrej Capital and its affiliates assume no responsibility for any loss or damage that may result from the use of or reliance on the information provided herein.