Loan EMI Default:  If you have taken a loan and are paying its EMI then this news is for you. If you accidentally miss the loan EMI even for a day, it can prove to be costly.

Bank Loan EMI: Taking a loan from banks has now become a common thing. From buying a house to getting treatment, one can easily get a loan. But many times people forget to maintain the required balance in their bank account on the day when the EMI of that loan has to be deducted. 

They realize this when they get a message that the EMI could not be deducted due to low balance. After this, they have to run around to make the payment and also have to pay a penalty to the bank.

If you have also taken a loan and are paying its EMI, then this news is for you. If you miss the loan EMI even for a day, it can prove to be costly. Missing even a single loan installment can affect your credit score, due to which you may get a loan at a higher interest rate in the future.

Apart from this, banks can also charge penalty on these installments. Therefore, it is very important to make payments on time so that your credit history remains better. For this, you can set a reminder or turn on the payment in automatic mode so that the deadline is not missed.

Impact on credit score too

Rajiv (name changed), who missed loan EMI payment, says, "Missing EMI payment even for a day can have a huge impact on your credit score. A one-day default on EMI of my home loan and linked top-up loan resulted in a massive drop of 27 points in my credit score. My CIBIL score was 799 in August 2024, which became 772 in September 2024. Despite paying the next installment on time, the credit score remained the same in October 2024. Similarly, the Experian credit score dropped from 734 in August 2024 to 724 in September 2024."

Adhil Shetty, CEO, BankBazaar.com, says, "Late or missed payments can lead to fees, penalties and a negative impact on your credit score. So make sure you pay your EMIs on time so that your loan costs don't increase and your credit score remains safe.

The cost of loan may increase

Apart from this, if your credit score is around a critical score then your next loan may prove to be costly for you as you will get the loan at a higher interest rate.

For example, if you are planning to take a home loan top-up from SBI and your CIBIL score is 760, then you are eligible for the cheapest interest rate offered by the bank, which is 9.10%. However, if your score suddenly drops below 750, you will have to take a home loan at an interest rate of 9.30%. This means that you will have to pay Rs 46,593 more as interest. It is worth noting that this can happen even if you default only once.