Life can be unpredictable and full of surprises. Sadly, not all of us are skilled enough to hit a home run every time, are we? A personal loan default is one of these unpredictable events. Now, there are a variety of reasons why this might occur. These may be things such as insufficient finances or forgetting to make a payment on time. But the most effective plan of action is to act as soon as possible.
It’s essential to understand the actions you should take to stop your debt from getting out of control if you’ve recently missed an EMI payment or are having trouble making your loan payments.
The number of people using personal loans to pay for big-ticket items, getaways, and debt consolidation has been steadily rising over the last several years. Personal loans, as everyone knows, are unsecured loans with short application processes and speedy disbursements.
In addition, personal loans have an adjustable payback period that varies from one to five years. Customers of banks and other lending institutions have the choice to select the loan term that best suits their needs.
Even after selecting the repayment period and monthly installment alternatives that best suit their needs, borrowers occasionally find themselves unable to make their EMI payments on time for a specific month.
The Best Personal Loan Offers in 2024
| Loan Provider | R.O.I | Processing Fees | Loan Amount | Cibil Score |
| Paysense Personal Loan | 18% – 22% (Reducing Per Annum) | 2% – 5% | 50.00 k – 10.00 Lacs | 700 |
| Werize Personal Loan | 15% – 22% (Flat Per Annum) | 3% – 5% | 30.00 k – 5.00 Lacs | 650 |
| Money View Personal Loan | 17% – 36% (Reducing Per Annum) | 1% – 5% | 5.00 k – 5.00 Lacs | 650 |
| IDFC Bank Personal Loan | 10.49% – 22% (Reducing Per Annum) | 1% – 4% | 1.00 Lacs – 40.00 Lacs | 700 |
| Incred Personal Loan | 16% – 33% (Reducing Per Annum) | 1% – 5% | 50.00 k – 10.00 Lacs | 650 |
| Aditya Birla Personal Loan | 12% – 28% (Reducing Per Annum) | 1% – 4% | 1.00 Lacs – 50.00 Lacs | 650 |
| Finnable Personal Loan | 16.95% – 30% (Reducing Per Annum) | 1% – 5% | 50.00 k – 10.00 Lacs | 700 |
| Hero Fincorp Personal Loan | 9.5% – 16% (Flat Per Annum) | 1% – 5% | 50.00 k – 10.00 Lacs | 700 |
| Muthoot Finance Personal Loan | 14% – 22% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 7.50 Lacs | 685 |
| Upward Fintech Personal Loan | 18% – 32% (Reducing Per Annum) | 2% – 5% | 25.00 k – 5.00 Lacs | 650 |
| Cashe Personal Loan | 1.5% – 3% (Fixed Monthly) | 1.5% – 2% | 10.00 k – 4.00 Lacs | 550 |
| Finzy Personal Loan | 10.99% – 18.99% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 10.00 Lacs | N/A |
| Fibe Personal Loan | 15% – 30% (Reducing Per Annum) | 1% – 2% | 8.00 k – 2.00 Lacs | 550 |
| Faircent Personal Loan | 25% – 30% (Reducing Per Annum) | 7% – 9% | 50.00 k – 10.00 Lacs | 700 |
| Stashfin Personal Loan | 2.45% – 4% (Fixed Monthly) | 2% – 2% | 5.00 k – 5.00 Lacs | 725 |
| Tata Capital Personal Loan | 10.5% – 14.25% (Reducing Per Annum) | 0.75% – 2% | 75.00 k – 25.00 Lacs | 720 |
| Standard Chartered Bank Loan | 11.49% – 20% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 1.00 cr | 740 |
| Bajaj Finserve Personal Loan | 13.5% – 15% (Reducing Per Annum) | 0.5% – 1.5% | 1.00 Lacs – 35.00 Lacs | N/A |
| Axis Bank Personal Loan | 11.15% – 16.25% (Reducing Per Annum) | 1% – 4% | 1.00 Lacs – 40.00 Lacs | 690 |
| ICICI Bank Personal Loan | 10.5% – 15% (Reducing Per Annum) | 0.5% – 1.5% | 1.00 Lacs – 1.00 cr | 700 |
| Fullerton Personal Loan | 14% – 32% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 25.00 Lacs | 705 |
| HDFC Bank Personal Loan | 10.25% – 16% (Reducing Per Annum) | 0.5% – 1.5% | 1.00 Lacs – 1.00 cr | 700 |
| Shubh Life Personal Loan | 28% – 44% (Reducing Per Annum) | 1% – 3% | 5.00 k – 2.00 Lacs | 650 |
| Loan Tap Personal Loan | 11% – 24% (Reducing Per Annum) | 1% – 2% | 50.00 k – 7.00 Lacs | N/A |
| KreditBee Personal Loan | 1.5% – 3% (Fixed Monthly) | 5% – 6% | 1.00 k – 3.00 Lacs | 550 |
| FlexSalary Personal Loan | 1.5% – 3% (Fixed Monthly) | 300% – 750% | 4.00 k – 2.00 Lacs | 550 |
| Mpokket Instant Loan | 2% – 4% (Fixed Monthly) | 50% – 200% | 500 – 30.00 k | 550 |
| MoneyWide Personal Loan | 17% – 24% (Reducing Per Annum) | 1% – 3% | 10.00 k – 3.00 Lacs | 650 |
| Insta Money Personal Loan | 13% – 36% (Reducing Per Annum) | 1% – 4% | 5.00 k – 25.00 k | 650 |
| Kotak Bank Personal Loan | 10.75% – 22% (Reducing Per Annum) | 0.75% – 2.5% | 1.00 Lacs – 50.00 Lacs | N/A |
| Cholamandalam Personal Loan | 14% – 22% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 35.00 Lacs | 675 |
| SBM Personal Loan | 14% – 20% (Reducing Per Annum) | 1% – 4% | 50.00 k – 25.00 Lacs | 700 |
| Axis Finance Personal Loan | 14% – 16% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 50.00 Lacs | 650 |
| Shri Ram Finance Personal Loan | 13% – 16% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 25.00 Lacs | 680 |
| One Tap Loan Personal Loan | 24% – 36% (Reducing Per Annum) | 2% – 5% | 50.00 k – 5.00 Lacs | 650 |
| Credset Personal Loan | 18% – 30% (Reducing Per Annum) | 3% – 5% | 50.00 k – 5.00 Lacs | N/A |
Default Classification for Loans
The majority of banks and other financial organizations divide loan payment defaults into two groups:
Major Defaults: Significant defaults If a borrower does not make a payment for more than ninety days, it is considered a major payment default. The majority of financial organizations avoid working with people whose credit reports show significant payment defaults. A loan account is classified as Non-Performing Assets (NPA) when payments are overdue by more than ninety-nine days.
Minor Defaults: Small defaults Loan accounts with nonpayment periods shorter than ninety days are considered minor payment failures. Minor defaults on a loan account can be forgiven by borrowers, although the negative impact to their credit report may be permanent.
The Consequences of Not Making Personal Loan EMI Payments
CIBIL Rating: The most evident effect of missing loan payments is a reduction in your credit rating. To be authorized to apply for a loan, most lending firms require applicants to have a CIBIL score of 750 or above. A borrower’s credit score may decline by 50 to 70 points for missing even one EMI payment.
Creditworthiness: A borrower’s credit report includes remarks regarding their repayment history in addition to their credit rating. Rejection of a personal loan is frequently due to remarks on payment problems in the credit report, even in cases when the borrower’s CIBIL score is above 750.
Penalties: Individuals who fail to make their EMI payments may be subject to late fines imposed by various banks and financial organizations. Although the amount charged varies, it typically ranges from 1% to 2% of the outstanding EMI.
Agents of Recovery: When the default term has gone past 90 days, banks and other financial institutions may, as a last resort, engage agents to retrieve the loan money. Before the loan account is flagged as non-performing assets (NPA), the borrower is first given a 60-day notice by the bank. Knowing how unpleasant it may be, it is preferable to avoid situations like this one.
Ways to Prevent Loan Defaults
Loan defaults should be prevented at all costs, but in the event that they do occur, there are a few strategies that can be used. Most of the time, borrowers are aware of their ability to make the forthcoming EMI installments in advance. The borrower may want to think about the following choices.
Better Financial Planning: Better financial planning on the part of borrowers is advised to proactively reduce the likelihood of loan default.
Demand a Reduced EMI: The borrowing party should contact the bank, explain their financial situation, and ask for a reduced interest rate if they anticipate missing a loan payment. Typically, banks will reduce EMIs by switching an unsecured loan to a secured loan or by extending the term of the current loan.
If the loan switches from an unsecured to a secured loan, there will be less interest due on the original loan amount. Switching an unsecured loan to a secured loan is the better option out of the two because it has a much smaller annual percentage rate (EMI) than extending the loan period. Moreover, very few institutions allow loan terms to be extended.
Partial Payments: Another effective strategy to reduce the interest rate and EMI payments is to make partial payments. This is an additional preventive measure, nevertheless, to make sure the borrower can afford to make EMI payments for the full term of the loan. A partial payment might reduce expenses if the borrower has extra money and an active personal loan.
Requesting a Period without EMIs: When there is a pause in income, the applicant can go to the bank and ask for an extension of the time without interest payments. When a consumer loses their job or temporarily suspends operations, banks frequently grant such demands.
The bank waives EMI payments for consumers for three to six months. After that, the borrower must start making EMI payments again. Even though personal loans are a great way to pay for large expenditures, a borrower’s repayment history will have a substantial impact on whether or not they are eligible for further loans in the future.
If You are One Day Late with Your EMI Payment, What Should You Do?
Make the payment right away, look for any late fines, and let your lender know if you are one day behind on your EMI. Future delays can be avoided by setting up automatic payments or reminders. Getting in quick contact with your lender can frequently reduce any bad consequences.
Thus, in the event that you ever find yourself in a situation similar to this, you need to do the following:
It should be Seldom too Late to Ask for Assistance: Contact your bank and discuss with your personal loan manager if you have not made your EMI payment. Describe the circumstances. Your bank might offer to postpone your payment if there’s a legitimate reason, like a family medical emergency, and let you settle the balance using the mobile banking app the following month. You must promise, though, to make the two EMI payments on deadline. The bank might impose a nominal late payment penalty.
Request for an Extra Period: It is still essential to speak with the bank officials to find a long-term resolution if you believe you will not be able to pay your EMI in the upcoming months due to a long-term difficulty, such as a pay cut or a job loss. You can ask to have your plan reorganized. You’ll feel some respite from this, and you can resume your normal routine in the upcoming month.
Look into Loans Secured by Investments or Insurance: Taking out a loan secured by your own assets, such as gold, a fixed deposit, or personal insurance, is the best choice of action in the interim. You can pay back a secured loan taken out against collateral later since its interest rate is cheaper. You can pay off your higher-interest loans with the money you receive now.
Request Settlement: At this point, if none of the aforementioned strategies work, discuss loan settlement with your bank. This will imply that you consent to paying back a portion of the debt and that the bank views the loan as resolved. This option lowers your credit score, while the others don’t. Compared to a loan that is completely repaid, a debt that is “settled” has a worse effect on your credit history.
Even if you have these options available, saving money for emergencies is still the suggested plan of action. You therefore know just how to turn your bat when you notice a curveball rushing at you.