It is now commonplace to take out a bank loan. Loans are readily available for anything from home ownership to medical care. However, on the day that the Loan EMI is due, many people neglect to keep the necessary amount in their bank account.
They become aware of this
when they receive a notification stating that the low balance prevents the EMI from being deducted. Additionally, they must pay a penalty to the bank and rush around to complete the payment. There will be a significant loss. This information is for you if you have also taken out a loan and are making your EMI payments. Even if you miss one day’s loan EMI, 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.
In addition, banks have the authority
to impose penalties on these installments. As a result, timely payments are crucial to maintaining a positive credit history. To ensure that the deadline is met, you can either set a reminder or enable automatic payment. “Even a single day of missing loan EMI payments can have a significant effect on your credit score,” says Rajiv (name changed), who missed the payment. My credit score plummeted by 27 points as a result of a one-day default on the EMIs for both my home loan and the associated top-up loan. In August 2024, my CIBIL score was 799; in September 2024, it was 772. Even though the subsequent installment was paid 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.”
The loan’s cost could go up.
In addition, your next loan could be expensive for you because of the higher interest rate if your credit score is close to a crucial level. For instance, you are qualified for the lowest interest rate that SBI offers, which is 9.10%, if you intend to take out a house loan top-up from the bank and your CIBIL score is 760. However, you would be forced to take out a home loan with an interest rate of 9.30% if your score unexpectedly falls below 750. This implies that you would be required to pay an additional Rs 46,593 in interest. It is important to remember that even if you just default once, this could still occur.
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