But doing so definitely puts a strain on one's cash flows by way of monthly instalments. If you have taken too many debt obligations, and are finding it difficult to fulfil your monthly commitments, what should you do?

If you miss an EMI for a month or two, the late payment record will find its way to the credit report. Since payment history affects your CIBIL score calculation, your score reduces by a few points. But it will not have a very serious impact on your credit profile. You can gradually improve your score by following good credit habits in future.

However if you default for 3 consecutive EMIs it signals your inability to pay the loan amount and brings a major dent in your score. A default for more than 90 days is taken seriously by the bank. It treats it like an NPA and makes aggressive attempts to recover the loan amount. So defaulting on loan is certainly something that you must avoid; however it isn’t the end of your financial life. Let's see the options you have in case you default on your loans.

Restructuring the loan-

If you are not able to find a feasible solution with your current bank, and another bank is offering you a good deal at a lower rate of interest, then you can refinance your loan.

If the bank finds your reason genuine, it will always try to work out a mutually acceptable feasible solution. In case of secured loans, banks do have the right to repossess your asset to recover their amount, but since repossession is a very lengthy procedure; banks also prefer to work out an alternate solution that satisfies both the parties.

You can work on improving your score by following good credit habits. Till the time your score shows an improvement you can depend on loans for low CIBIL score to meet your financial requirements.