What are the Consequences of a Missed Loan Payment? How to Correct It?

Did you know about the kinds of loan payment defaults? Major defaults are those where you have not paid the EMIs in more than 90 days. This can significantly affect your credit score, and your loan account falls under the Non-Performing Assets group. However, if you miss a payment in less than 90 days, it is seen as a minor default. This impacts your credit score to a lower extent, and you can usually recover from it. If you borrow money on a loan app, you can track your loan and repayment statuses. This can help you plan your EMI payments properly. Nevertheless, if you still miss a payment, here are its consequences and the ways to correct it. 

What Happens When You Miss a Loan Payment?

Your Credit Score Will Fall: As already discussed, the primary consequence of missing a loan payment negatively impacts your credit score. If you miss even one EMI payment, your score may drop by 50-70 points.

Your Creditworthiness Will Go Down: A low credit score will imply poor creditworthiness on your part. As long as your score remains low, the chances of getting new credit products will be less. So, you may not get instant loan approval for a new application. That's because lenders don't trust borrowers with credit who show a poor repayment record.

Late Fee Will Be Charged: A lender usually charges a late fee as a penalty if you miss a loan payment. The rate of the late payment fee varies from one lender to another, but it is charged on the EMI that is due.

 

How to Correct a Missed Loan Payment?

Make a Part Payment of a Larger Amount: If you have missed paying an EMI but have surplus funds to make it up, consider making a large part payment for the next instalment. You can make a part payment equal to two EMIs in the next month if you can afford that. After that, you can keep paying the usual EMI amount.

Pay off the Entire Outstanding Balance: You can otherwise consider clearing the whole debt by paying off the entire outstanding loan amount. That way, you can become debt-free right away. Taking this step can be helpful if you worry about missing a payment on the same loan again. Double-check whether you have closed the borrowed loan on the money loan app.

Conclusion

It's best to plan your loan repayment right after borrowing to prevent any possibility of missing a payment. Consider initiating an automated debit facility from your bank account to the lender's account on a specific date. Then you need not put effort into remembering the EMI payments. They will be made automatically and there will be no risks of missing any payment. With a good repayment history, you can get instant loan approvals in the future.