Missing your EMIs? Here is what can go wrong!
With a lot of freedom also comes some responsibility. While the world relies on the internet for most things, banking has also become more accessible. Now, digital banking is your answer to getting loans quickly without any hassle. However, there has not been an easy way to sort the installments yet. You have to repay your EMIs as you used to in the conventional era, with no shortcuts. Delayed EMIs and repay ignorance can brutally impact your financial system. Here is what can go wrong if you miss your EMIs.
The bank implies overdue charges if you do not pay your EMI for a month of its designated date. The penalty charges may vary from 1% to 2%, depending on the bank and the type of loan one takes.
NPA classification of your account
Banks categorize EMI default into two categories: minor default and major default. If your EMI delays up to three months, it will be a minor default; however, it will fall under the major default category if you miss three times. Under the minor default category, the bank levy penalties, send reminder notices, and report the delay to the credit bureaus. The rules and penalties for major default categories are more serious. If you come under the major default category, the bank may consider your loan as Non-Performing Asset (NPA). Before that, the bank sends a notice to you so that you can deposit the requisite amount within the time frame mentioned in the statement. You are charged with a penalty if you fail to adhere to this last warning.
Impact on credit score
Your credit score also decreases with every deadline you miss concerning your EMI.
Loan repayment can be tricky when you are already tight on budget. It is better the plan ahead than to invite all the problems listed above. The worst mistake you could make is to apply for another loan to settle the previous one.