Defaulting on your EMI’s
There are many charges involved when one defaults in paying for the loan. There are penalty, cheque and other miscellaneous charges involved. And if consequently every month you default the charges keep building up with the EMI amount. Hence you burden yourself and increase your debts. It’s best to make regular and timely payments.
Once you have availed a loan from a bank it is obligatory that you make regular monthly payments. Which is called as equated monthly installments (EMI), this amount is calculated based on your loan amount, interest rate and tenure. When you sign the agreement for the loan you are committed to make this payment every month. Incase you miss out on making a payment there are late payment charges levied to your account and besides that your credit score gets affected.
There are various other charges levied if you default in making the payment on time. Following are the charges levied to your account incase you default.
A penalty charge is levied if you do not make a payment for 30 days after the due date. This charge is normally levied at a rate of 1 to 2 % of your EMI amount. This amount is payable since you have defaulted on your EMI payment.
You can either make the EMI payment through post dated cheques(PDC) or electronic clearing system (ECS). If your bank account does have the available balance for your EMI payment as a result your payment gets bounced, for this is there are additional cheque bounce charges levied. This amount would vary for a PDC payment and ECS. In case of PDC payment defaulted the charge would be ranging from Rs250 – Rs400 depending on bank to bank. And for ECS payment the charge would be between Rs100-Rs150.
In addition to the above charges there could other miscellaneous charges levied by the bank. And if you default repeatedly every month the rate of interest fro penalty charge may increase. This is dependent on the banks, so that the customer may avoid defaulting further. Also as you would have the signed the loan agreement you may not have much to say in this regard. This would only increase your debt situation. So read the fine print and avoid defaulting.
Due to your defaulting in making payment for your loan, firstly your credit rating gets affected and the bank would follow up for their payment through their recovery agents. If your rating is low in the CIBIL report then there are very less chances of you getting a loan or credit card in the future.
Hence, if you have taken a loan make sure that the payments are regular and do not default. Always plan your finances well and save up if there are excess funds. You can then even fore close your loan and be debt free.
