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.
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.
Now that you know the meaning of overdue payment on a loan, here are its disadvantages:
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.
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.
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.
In case of an unsecured loan, banks and NBFCs can take the matter to court.
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.
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.
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.
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.
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.
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.
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.
Here are some ways you can remove the loan overdue remark from your CIBIL report: