What happens if you miss your business loan EMI payment?

A business loan is a perfect option for emergencies when your organization is in dire need of finances. With simple application processes and quick disbursals, there are plenty of lenders from where you can get your loan processed almost instantly. But sometimes, paying back the loan can become challenging due to unexpected circumstances. As a result, you miss EMI payments. So, how does this affect you? Let’s find out.

loan EMI payment

1. Affects credit score and credit report

One of the first things that a late EMI does is it affects your CIBIL score. Depending on your payment’s delay, you are marked as a minor defaulter (payment made within 90 days) or a major defaulter (not completed payments in over 90 days). Accordingly, your credit score takes a hit. Maintaining a good credit score is essential, especially if you’re looking for new loans with better business loan interest rates in the future.

2. Penalties

A late EMI payment can attract additional charges as the lender could impose penalties on missing timely payments. Typically, lenders have a grace period after your due date, for which you face no charges. However, they will charge you a penalty that varies from lender to lender if you cross the grace period. Usually, it’s around 1-2% of your EMI.

3. Lowers future borrowing capacity

Whether you already have a loan or not, lenders mandatorily examine your credit score and report carefully to ascertain your financial stability when you apply for a new one. A low score shows you’re not paying EMIs on time, whatever the reason.

Now, if you’re a defaulter, it will show up in this examination. Sometimes, with a meager score, you will not meet the eligibility criteria. Sometimes, even with a bad score, lenders may hesitate to give you money. Even if they make an exception, the amount you receive may be lower than you need and higher business loan interest rates.

4. Potential legal implications

In extreme cases, there are chances you can go to jail or face a civil suit. At the same time, they’re scarce, especially for a secured business loan. However, this only occurs after multiple unsuccessful attempts by the lender to get their money. Most often, matters are sorted out much earlier, and this is a last resort of sorts.

The above consequences highlight the importance of a business loan EMI calculator and why you should use one to determine if the amount you seek is within your means. When you take a business loan, you should be able to handle the repayment. A good tip is to ensure EMI payments are less than 45% of your monthly earnings so regular payment is possible and you can pay them comfortably.

About author

Social media fan. Unapologetic food specialist. Introvert. Music enthusiast. Freelance bacon advocate. Devoted zombie scholar. Alcohol trailblazer. Organizer. Spent 2001-2004 merchandising ice cream in Mexico. My current pet project is getting to know walnuts for fun and profit. At the moment I'm writing about squirt guns in Salisbury, MD. Spent childhood donating toy planes in Suffolk, NY. Gifted in managing jack-in-the-boxes in Miami, FL. Spent high school summers supervising the production of foreign currency in Libya.
    Related posts

    Valuation of less costly housing finance corporations appears stretched


    Air India: Divestment of government stake not likely this monetary year


    Seven indicators you need help trading stocks in Singapore


    3 Things That Are a Lot Harder Without Good Credit

    Sign up for our Newsletter and
    stay informed