What Are The Personal Loan Default Consequences in India?

When you enter into the loan agreement, then you commit to repay the principal amount with interest. But if you miss any of the installments due to unexpected reasons. Whether it is an unexpected loss of your current job, suffering from health, or any issue, then you may face the issue of loan default.

But what is personal loan default consequence, and how can you deal with such scenarios? If you want to know about all these things, stay connected with this essential article, especially if you are looking for a personal loan. 

Meaning of Personal Loan Default and Loan Defaulter

If you miss your one EMI payment, you don’t call as a defaulter. However, you consistently miss out on several EMI payments. Then your moneylender can take action against you and can report you as a defaulter. So, EMI default means when the borrower misses out on several payments for the EMIs, and the borrowers who miss out on these payments are called defaulters. However, some money lenders offer a grace period or extend the time to pay installments. However, you will be charged a late fee, but you will not be analyzed or called a defaulter.

When Does A Personal Loan Default?

The personal loan defaults to the late payment EMIs by 30 to 90 days or as per the agreement terms. However, if you get a batch of defaults, your credit score can get affected and create several issues in the future. Therefore you should use the grace period that the lender allows 10 to 15 days more by charging some percentage late fee.

Personal Loan Default Consequences in India?

Personal Loan Default Consequences In India?

Let’s talk about the consequences you may face if you default on a personal loan. Here I have come up with some key things you may face if you report as default.

1. Your Credit Score Can Get Affected Badly

Do you know all the banks and NBFCs report to the credit bureaus about missed payments? They all report to CIBIL and Equifax. Once they are reported, your credit score can drastically get affected. And if you have a low credit score, you will face more challenges to get credit or a loan next time you need to borrow funds. 

2. It Can Cause An Increase in Financial Burden

You have to face penalties, late fees, legal charges, and any outstanding expenses. As you already have pending installments or EMIs to pay, and now these expenses can cause a significant burden on your head. You will also face problems in gathering funds to pay the next installment that would become. 

3. Concerning Banks and NBFCs Can Take Some Legal Action Against You

If you do not pay their money or the EMIs on time, the concerned bank or NBFC can take legal action. And if this happens, then you will not only have to spend to hire an advocate but also some additional costs and hidden charges. If the outcome goes against you, banks can sell your securities and other assets to recover their money back. 

4. The Co-Signer Or Guarantor Can Also Get Impacted

Many times some loans also require a cosigner. If you also had your guarantor or cosigner, then their credit score can also get affected. They will start receiving the mail, calls, and other messages to recover the loan amount. And in the future, you will face difficulties in finding a cosigner or guarantor too.

What Should You Do If You Default On a Personal Loan?

So, what can be solutions to deal with such situations effectively? Now you would be thinking the same, so here are some crucial things you can prefer if your lent declared you default.

1. Stay Calm and Look For Solutions

When lenders recognize you as a defaulter, you can panic, but you need not do this. In such situations, you need to understand and analyze the situations and look for possible solutions. You can take the help of concerned or experienced people in your family and friend circle. There are many online resources such as youtube and other mediums where you can find some crucial tips.

2. Know Your Rights As a Defaulter

You have received some rights if you are a defaulter, whether knowingly (wilful) or unknowingly (genuine). You should know that the RBI governs all the banks and all the financial institutions. They are committed to taking care of their customers as it is the code of commitment to keep the trust of their customers. So, as per the law, you can contact the banks and recovery agents because they can not manhandle or threaten you.

3. Discuss With The Concerned Lender

If you are a genuine defaulter or willful, you can consider talking about the lender because communication can help save your good CIBIL score.  You can explain the core reasons why you defaulted the EMIs and ask for possible solutions. Here you can request to get more time to repay the amount, reconstruct the remaining loan and increase tenure to reduce the financial burden by reducing the EMI amount. Also, you can request the settlement if you can not pay the remaining EMIs to the banks.

4. Try To Refinance It Will Reduce Burden

You can also refinance if you have a good credit score because if you do this, you can quickly pay the EMIs on time and reduce your financial burden. However, you should look for refinancing if you can pay it in the future without some genuine sources. 

5. Start Earning More Or Reduce The Expenses

You can look for freelance or part-time work to earn more money and repay the remaining loan amount. If you do not have such an option, you can reduce the monthly expenses and try to save a good portion to meet the amount of personal loan EMI. 


If you miss out on EMIs consistently, the bank can report you as a defaulter and face many consequences. Some of these consequences are reducing credit scores, increasing financial burden, and legal action from banks and NBFCs. However, you can deal with a hard-to-manage scenario by talking with the lender, refinancing to pay current EMI, and earning or saving more money.

I hope now you have understood personal loan default consequences in India and are also aware of possible solutions you can use. So, if one of your friends is also dealing with such a situation or willing to take a personal loan, you should share this article to get help from it. 

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