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.
It is crucial to know that there are short-term and long-term effects of missing your dues, so you can take care of your financial wellness.
Overdue loans not only increase your financial burden but can also affect your financial health and creditworthiness. Keep these details in mind:
To better understand overdue loan payments, know how they differ from an outstanding payment.
Parameters | Outstanding Payments | Overdue Payments |
---|---|---|
Definition | Remaining principal amount and interest left to be repaid | Unpaid EMIs that are past the due date |
Payment 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 |
Also Read: Did you miss personal loan EMI? Know what will happen
To better comprehend its impact, here are some disadvantages you should note.
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.
If you have multiple unpaid loan EMIs, then you must pay a hefty penalty for all the defaults. The penalty amount is usually 1-2% of the unpaid EMI amount.
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.
In case of an unsecured loan, banks and NBFCs can take the matter to court.
Your 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 credit 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.
If you have any unpaid dues, here are a few smart ways you can pay them effectively.
To avoid any hassle, 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 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.
When your loan is overdue, lenders charge a hefty penalty on your missed EMI payments. You will get continuous reminders from the lender until you repay the entire overdue amount.
There are many reasons why a loan may become overdue, such as:
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.
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.
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.
Here are some ways you can remove the loan overdue remark from your CIBIL report: