Loan EMI Repayment Problems in India – Complete Guide To Causes, Risks And Recovery Solutions

Key takeaways: 

• Obtaining a loan has become very easy but because of multiple loans, there are high chances of delay in the EMI payments. This leads to loan repayment problems in India. 
   
• Sometimes people suffer from financial stress due to loans.
   
• At LoansJagat, guidance is provided to help you make informed decisions about your EMIs and financial hardship loan help.

Bonus tip: 

When there is delay in the personal loan EMI repayment or non payment, personal loan bounce charges are applied as penalties. Average bounce charges in private banks are ₹300 – ₹750 per bounce plus interest on the due amount. This is the situation when you are unable to pay loan EMI on time.

 When you fail to pay the loan EMI for any reason, banks begin their complex process of recovering the amount. It starts with phone calls and followed by legal notices. 

Think of your income as a bucket and your expenses as holes in that bucket. If holes are small, water stays but when holes become larger or your EMI pressure increases, the water flows out and you are left with no money or savings. The solution is not to panic or take stress but you have to fix those holes so that your EMIs become manageable. 

For example, I earn ₹45,000 per month from a content writing job and my total EMI amount is ₹22,000 per month. To save some money for emergencies, I used the method of loan restructuring and increased the tenure. This small change helped me save thousands every month. 

What are the common reasons for problems in repaying loan EMIs? 

After applying for the loan, small mistakes in handling EMIs can lead to long-term financial stress and negatively impact your credit score. Here's a look at some of the most common reasons why loan repayment problems in India are rising: 

• Missing EMI payments: 

Whenever you miss an EMI payment, there are consequences like legal notices, penalties and even negative impact on your credit score. Sometimes, you take so many loans that it causes financial stress and you miss paying the EMI. 

• Choosing wrong EMI tenure: 

Selecting the wrong EMI tenure can either overburden you with high monthly payments or stretch your repayment period too long, increasing your interest costs.

• Ignoring prepayment options: Many of you stick to the fixed EMI payment schedule. But it is important not to ignore the prepayment option. Prepaying a part of the loan can reduce the overall interest burden and act as a loan default solution in India.

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For example, you took a loan of ₹10,00,000 from HDFC Bank at an annual interest rate of 10% for 5 years. You want to buy a car, but instead of waiting for the monthly loan payments, you decide to prepay some amount. Below is the impact of prepayment in your case: 

Paying off something before you have to; that's what a prepayment is. 

• Taking many loans before planning your monthly budget: Many borrowers take multiple loans without considering the negative impact of these EMIs on their monthly income which results in increased debt and financial stress because of the loan.

• Not using the EMI calculator before applying for a loan: an EMI calculator helps you to know your estimated monthly EMIs before applying for a loan. You just have to provide some basic details in the calculator like your loan amount, tenure and interest rate. Many borrowers never use the EMI calculator which in future causes them financial burden. There are different types of EMI calculators available for different types of loans. 

For example, Amit is a manufacturing unit owner and he requires ₹1,00,00,000 to upgrade some machinery at his unit.  He used the business loan EMI calculator and compared different scenarios with different tenures to ensure that EMIs will not affect his salaries. 

The business loan EMI calculator helped Amit see the difference between the tenures and choose the 84 months option without financial pressure on purchasing the raw materials.

These are some of the major reasons why loan EMI repayment has become a problem for many borrowers. 

What are the ways to prevent Loan EMI Repayment Problems in India? 

Also Read : What to Do When Monthly Payments Become Unmanageable

Some ways that prevent EMI mises: 

Loan restructuring: you can increase or decrease the loan repayment tenure according to your financial budget. For instance, you have taken a personal loan of ₹10,00,00 at 12% interest rate per annum for 5 years: 

Increasing the repayment tenure to 7 years from 5 years will help you to save ₹4,580 per month. 

Auto payment option: Set up automatic payment from a savings account.

Setting reminders: Set reminders 5 days before due dates of the EMI payment.
 

Buffer amount: Maintain a ₹15,000–₹20,000 buffer amount  for sudden expenses.
 
Separate account: Avoid using salary accounts for EMIs and better use a separate account.

These are some of the ways to reduce errors in loan EMI repayments. 

Conclusion: 

Applying for a loan is easy but not being able to repay it becomes stressful for your finances. Even if the bank declares bankruptcy, there are possibilities that the bank can also send legal notice or can claim ownership of your assets. Taking stress is not the solution to these problems. Instead, adopt a positive approach by carefully managing your income and expenses. So that you can pay your loan EMIs on time and without any financial stress. 

FAQs: 

How does budgeting help in handling multiple EMIs?

By keeping a monthly budget, you can also ensure keeping aside the amount for your EMIs. It reduces the risk of missing or delayed payments.

What is home loan prepayment?

Home loan prepayment refers to payment of installments more than the actual dues. Prepaying a part of the loan can reduce the overall interest burden and shorten the repayment period.

Is loan prepayment good? 

Yes, loan prepayment is good as you can save a lot of interest and also the loan repayment burden gets off faster. 

Can we restructure loans to reduce tenure?

Yes, you can increase or decrease the loan repayment tenure according to your financial budget. 

What will happen if you pay the full EMI amount at once? 

If you pay the full EMI amount at once, the loan will close early and no further EMIs are required.