Loan Overdue Payments: Its Importance & Tips to Clear It

Did you miss a few of your EMI payments? An overdue on a credit facility or loan refers to any situation when your loan instalment is not paid by the deadline. You may have missed the due date for many reasons, some of which may not be in your control.

Knowing the loan overdue meaning and understanding that it has short-term and long-term effects is crucial. This way, you can take care of your financial wellness in a more informed manner. 

What is Overdue Amount in Loan?

Overdue loans not only increase your financial burden but can also affect your financial health and creditworthiness. Keep these details in mind:

• Loan overdue, meaning an outstanding balance due to unpaid EMIs, also includes the interest levied on the unpaid EMIs
• When you miss multiple EMIs, the amount accumulates and attracts interest and penalties
• Lenders are lenient if you miss one or two EMIs and may send numerous reminders to pay
• After 90 days of missing the due date or 3 unpaid EMIs later, lenders may declare the loan account as a non-performing asset (NPA)

Outstanding Payments Vs Overdue Payments

To better understand overdue loan payments, know how they differ from an outstanding payment.

Parameters	Outstanding Payments	Overdue Payments
Definition	The remaining principal amount and interest left to be repaid	Unpaid EMIs that are past the due date
Payment is due in terms of	Upcoming EMIs	Past EMIs
Status	Not due	Exceeded the deadline for repayment
Effect on credit score	Will improve the score if paid on time	Hurts the credit score
Penalties	No penalties if paid on time	Attracts penalties or interest
Repayment option	Can opt for advance payment or prepayment	Must be paid immediately to avoid consequences

Consequences of Not Repaying on Time

To better comprehend its impact, here are some disadvantages you should note.

• Results in a Notice from the Lender

At first, the lender will send routine reminders to pay the overdue amount. After this, you will get a written notice with the final payment date. The lender will take further action after this due date lapses.

• Leads to Heavy Penalties

If you have multiple unpaid loan EMIs, you must pay a hefty penalty for all the defaults. The penalty amount is usually 1-2% of the unpaid EMI amount.

• Causes Loss of Collateral

If you can’t pay the overdue amount before the final date, lenders can legally auction the collateral to recover the loan amount in the case of a secured loan.

• Leads Lenders to Take Legal Action

Banks and NBFCs can take the matter to court in case of an unsecured loan. After that, the court will announce its verdict on the matter, and you must abide by it. 

• Affects Your Credit Score

Your credit score will take a hit with multiple unpaid EMIs. Eventually, the credit score may drop 50-70 points with every missed instalment.

• Causes Damage to Your Credit Report

Having a history of late payments can reduce your chances of getting credit on favourable terms in the future. Removing the loan overdue remark from your credit report may be difficult and take time, so it is best to avoid it.

• Increases Your Interest Rates

With a dip in the credit score, getting a nominal interest rate on your future loans will be difficult.

How to Clear an Overdue Loan

If you have unpaid dues, here are a few smart ways to pay them effectively.

• Opt for a debt consolidation personal loan to reduce your EMIs and get a longer repayment tenure to release the financial burden
• Ask your lender to refinance your loan to get a lower interest rate
• Communicate your problem with the lender to find a solution, especially if you’re facing financial hardship
• Adjust your budget to prioritise clearing your past dues
• Seek financial advice from experts

Tips for Managing Overdue Loan Payments

Since precaution is always better than cure, you can take strategic steps to manage and avoid loan overdues.

• Choose the Repayment Plan Wisely

The key is to choose your tenure wisely. Do not burden your monthly budget with a hefty amount you may not be able to pay. This is the first precaution that can help you to avoid any repayment delinquency.

• Prioritise Your Repayment

Next you will have to ensure you are putting your repayment over any luxury purchases. First, repay your loan on time, and then you can upgrade your lifestyle and live as lavishly as you desire. In this way, you can safeguard overdue loans.

• Communicate with Your Lender

If there is an emergency and you have a strong credit history, then you can communicate with your lender. This way, you can figure out a middle ground where your lender appreciates your situation, and you can repay accordingly.

To avoid any hassle, it is best to plan your finances wisely so you don’t miss out on your loan EMIs. Choosing a lender with flexible terms is the first step in this direction. With the Fibe’s Urgent Personal Loan, you can get up to ₹5 lakhs at an affordable interest rate.

With no end-use restrictions, quick disbursal and flexible tenure options, getting a cash loan at Fibe is easy and quick. What’s more, you can easily monitor and pay the EMIs hassle-free with the Fibe Personal Loan App. Download the app now or register on our website to get started.

FAQs on Loan Overdue Payment

What leads to loans becoming overdue?

There are many reasons why a loan may become overdue, such as:

• Failing to make payment on the scheduled date
• Insufficient account balance if you have chosen autopay
• Financial emergency
• Loss of job
• Poor financial planning
• Missing the due date

What are the negative effects of loan overdue?

If you miss multiple loan EMIs, you may face many financial disadvantages. Having an overdue loan can lower your credit score over time. Furthermore, you will have to pay penalties on every unpaid EMI. If you opt for a secured loan, you may lose your collateral.

Does an overdue loan impact my CIBIL score?

Yes, it can negatively impact your credit score. This is because your repayment history is a major factor in deciding the score. Any delays or defaults show an inability to manage the loans, directly impacting your score.

What happens if a borrower does not repay a loan?

If a borrower cannot repay the loan, the lender can legally take possession of the assets pledged as collateral to recover the loan amount. This is the scenario when you opt for a secured loan.

However, the lender will send a notice with a deadline before seizing any collateral. In the case of an unsecured loan, the lender can take legal action if you don’t pay your dues on time.

How can I remove the overdue remark from CIBIL?

Here are some ways you can remove the loan overdue remark from your CIBIL report:

• Don’t miss any EMIs going forward
• Set up an auto-debit facility for future repayments
• Lower your debt obligations
• Part-prepay or foreclose your loan when you have surplus funds