Missing an EMI Payment by Just One Day? Here’s Why It Can Cost You More Than You Think
Overview
Missing even a single loan payment by a day might not seem like a big deal, but it can come with serious consequences. Not only can it impact your credit score, but it can also lead to penalties, increased interest rates, and potential hassles with future loans. Staying consistent with your payments is crucial, and setting up reminders or automatic payments can help prevent missed EMIs. Here’s a breakdown of what one late payment can mean—and some examples of what others have faced.
The Cost of Forgetting
Imagine it’s payday, but your account balance is just short of the EMI amount. By the time you realize it, the bank has already sent a message saying the payment couldn’t be processed. Now, not only do you have to scramble to make the payment, but there’s a likely penalty waiting for you. Even though you clear it within hours, your credit history has taken a hit, undoing years of disciplined repayment in just one day.
Take the case of Rajeev (name changed), who had a spotless repayment history until one small slip-up. After missing a single home loan EMI by just a day, his CIBIL TransUnion Credit Score dropped from 799 to 772—a 27-point drop. Even though he paid his next EMI on time, the score stayed at the lower level for months. The impact was no less with his Experian Credit Score, which fell by 10 points. This is a common story, and one day’s delay can set back your credit score and history.
Why This Matters for Future Loans
Even a minor drop in your credit score can make future loans costlier. Say you’re planning a top-up on your home loan with SBI. If your CIBIL TransUnion Score is 760, you could qualify for their best interest rate of 9.10%. However, if your score dips below 750, that rate could rise to 9.30%. The difference may sound small, but over a long-term loan, you might pay an additional Rs 46,593 in interest—just because of a one-time lapse.
The Snowball Effect of Bigger Delays
If a missed EMI isn’t quickly addressed, the effects can spiral. “Credit scores are calculated with a high emphasis on timely payments,” says Bhushan Padkil, SVP at TransUnion CIBIL. Even a one-day delay can lower your score as it’s registered as a missed payment. And if the delay stretches to 30 days, the impact on your score can be even harsher. A single 30-day delay could bring Rajeev’s score down by an additional 65 points, resulting in a total drop of 92 points in just a month.
Can You Pay the Missed EMI on the Same Day?
Once an EMI is missed, most banks will send you an alert by SMS or email, or even give you a call. Some banks offer a quick payment option to clear the missed EMI, which can reduce the damage to your credit score. “When notified, pay as soon as possible to avoid bigger penalties,” suggests Adhil Shetty, CEO of Bankbazaar.com. While many customers would like to make the payment immediately, some lenders only allow online payments after a day, which means the penalty stands.
How Long Will It Take to Recover from a One-Day Default?
Once your credit score is impacted, recovering it takes time and patience. If it’s a minor hit, your score might recover in a month or two. But for more severe drops, like a 30-day overdue, it could take up to a year or more to fully bounce back. Your recovery speed will also depend on other factors, such as the size of the unpaid amount and your repayment behavior going forward.
In short, even a one-day delay can create ripples, impacting your financial options down the line. Staying vigilant, setting up reminders, and automating your payments can go a long way in helping you avoid the unexpected costs of a missed EMI.
