A loan isn't just a financial aid, it's a responsibility that rests with you until the loan is repaid completely. You have to ensure that every single EMI is paid every month on time. This is the reason why many financial experts advice on enabling the auto debit feature that allows the lender to automatically deduct the EMI from your bank account every month. However, it’s not always possible to stay on track, and at a point, you may skip an EMI. The question is-what happens then?
Here is the thing- most banks don't expect you to be 100% punctual with your loan payments. So, it's alright if you occasionally pay a loan EMI a week or two late. In fact, many banks give the borrowers a grace period of 30 days. However, this doesn't mean that you can always pay a loan EMI late by as much as 30 days. The 30-day period is only offered for occasional delays.
This convenience of grace period is available with most loans including SBI home loans, Axis Bank personal loans, etc. However, if you are often late with the payments, then you face many risks, which are:
The most visible impact of late payments can be seen in your CIBIL score. If you don't know what CIBIL score is, it's one of the most factors that is used to determine your creditworthiness. It's checked by the banks when you apply for loans, credit cards, or even jobs. A lot of times, the interest rate on the loans is also determined on the basis of this score.
The majority of lenders consider a good CIBIL score to be at least 750. So, if you have this much score now but follow the pattern of late payments on a consistent basis, then your score can easily drop by as much as 70 points which can create problems for SBI home loans, car loans, etc.
Lenders want their borrowers to be responsible credit users and if you are late with your EMI payments, then you are shown in a bad light. So, if you apply for a loan in the future and the lender checks your credit report only to see that you have a history of late payments, then they will not be comfortable in trusting you. In other words, your credit profile assumes a risky attribute which becomes an easy reason for the lenders to reject your loan applications.
Making late payments frequently is an easy way to find your name on loan defaulters list. However, even if you are saved from this huge problem, you still have to pay a penalty for every late EMI that's late by more than 30 days. The actual amount may vary from one bank to another, but it’s usually around 2% of the EMI.
If you have given post-dated cheques to cover the EMIs, then you may have to pay a cheque bounce charge too. Plus, you will make the lender only miffed with you.
For a high CIBIL score, it's really important that you pay your EMIs on time every time. Even though the banks may give you odd 30 days after the due date, it's still better to pay on time. Believe it or not, timely payments go a long way in improving your credit report.
The following are some tips that can help you prevent late EMIs:
It can't be stressed enough how timely EMIs play a vital role in the calculation of your creditworthiness. So, be responsible and protect your CIBIL score before it's too late. Good luck!