Loan Overdue? Important features to know for your financial health

  • Published on: 16 Nov 2023
Loan Overdue? Important features to know for your financial health

A loan overdue occurs when you fail to pay the EMI of your loan, be it a personal, home, auto or any other form of loan. While availing a loan has become simpler, repaying it on time is equally essential.

Often, borrowers miss an EMI due to a financial emergency or unexpected job loss. In such a case, an overdue loan can increase your burden as lenders charge heavy penalties and late payment fees.

Read on to learn what happens if your loan becomes overdue, how you can repay it, and more. 

What is overdue on a loan? 

Loan overdue, meaning an outstanding balance due to unpaid EMIs, also includes the 

interest levied on the unpaid EMIs. When a borrower misses multiple EMIs, the amount gets accumulated and attracts interest and penalties.  

Generally, lenders are lenient if you miss one or two EMIs and may send you numerous reminders to pay the due. However, after a certain period, lenders may declare the borrower’s loan account as a non-performing asset (NPA). 

Keep in mind that overdue loans not only increase your financial burden but can also affect your financial health and creditworthiness. 

Also Read: Did you miss personal loan EMI? Know what will happen

What happens if you fail to repay your loan on time? 

Now that you know the meaning of overdue payment on a loan, here are its disadvantages:

  • Results in a notice from the lender

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

  • Leads to heavy penalties

 Borrowers with multiple unpaid loan EMIs must pay a hefty penalty for all their defaults. The penalty amount is usually 1-2% of the unpaid EMI amount. 

  • Causes loss of collateral 

If the borrower cannot 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 

 In case of an unsecured loan, banks and NBFCs can take the matter to court. 

  • Affects your credit score

 The borrower’s 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. Getting the loan overdue remark removed from your 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 lower interest rate on your future loans will be difficult. 

It is best to plan your finances wisely so that 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 Instant 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 personal loan at Fibe is easy and quick. Download our Personal Loan App or register on our website to get started.

FAQs on Loan Overdue Payment

What happens when a loan is overdue?

When your loan is overdue, lenders charge a hefty penalty on your missed EMI payments. Borrowers will get continuous reminders from the lender until they repay the entire overdue amount. 

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 have opted for a secured loan, then you may lose your collateral. 

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, too, the lender can take legal action if you don’t pay your dues on time. 

How do I clear my overdue loan?

A debt consolidation loan is the best option to clear your debt quickly. With this type of personal loan, you can repay your entire overdue amount as a lump sum in a single go. However, make sure to opt for a loan offering affordable interest rates than your existing loan to reduce your borrowing costs.

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

Our top picks

Can Millennial Stress be Resolved by Financial Wellness?
Finance | 3 mins read
How Organisations Can Measure the Impact of Financial Wellness Programs
Finance | 3 mins read
How Can HR help Overcome Staffing Challenges in the Digital Age?
Corporate | 3 mins read
5 Signs of A Good HR Function
Corporate | 3 mins read