Problems can come anytime in life, a sudden job loss, a medical emergency, or a business failure. And when you already have a personal loan, things can quickly become stressful. If you cannot pay your EMI on time, it may hurt your credit score and lead to heavy penalties. But there’s no need to panic. Banks and financial institutions do understand such situations and offer solutions.
Here’s what you should do if you’re not able to repay your loan right now.
1. Talk to Your Bank Immediately
The first and most crucial step is to inform your bank or NBFC (Non-Banking Financial Company). Don’t delay. Reach out to their loan officer or customer service through email or by visiting the branch.
Tell them honestly why you can’t pay the EMI. Banks prefer to help customers who intend to pay but are temporarily facing issues. You can request that the bank give you some time before restarting EMI payments. This is called a moratorium. Banks may agree to provide relief for a few months or even a year, depending on your situation.
Key Tip:
Always keep a written record of your communication with the bank.
2. Ask for Loan Restructuring
If your income has decreased or stopped temporarily, you can ask the bank to restructure your loan. In simple words, restructuring means the bank will change the terms of your loan so that your EMI becomes smaller and easier to pay.
How it works:
- The bank increases your loan tenure.
- Your monthly EMI gets reduced.
- You get time to recover financially.
Example:
You took a Rs. 5 lakh loan for 5 years. You paid for 3 years, but now you can’t continue. The bank may give you 3 more years to repay the balance, making your EMI smaller.
Remember:
Restructuring may increase your interest burden, but it helps you avoid loan default.
3. Use Balance Transfer (BT) Option
Many banks offer balance transfer loans. This means you can shift your current loan to another bank, which gives you the following:
- Lower interest rate
- More repayment time
- Extra money (top-up loan)
This helps in two ways:
- You close the older loan, saving on interest.
- You get some additional cash in hand to manage urgent needs.
Bonus Tip:
Some banks offer balance transfers for credit cards, too. But check if your existing loan is from an NBFC — some banks don’t allow BT for NBFC loans.
4. Avoid Taking Another Loan to Pay This Loan
It might sound like a quick fix, but never take a new personal loan to repay an old one. This can trap you in a debt cycle where you always borrow more to repay previous loans. Your financial stress will only grow.
Instead, explore the options given above or speak to a certified financial planner for guidance.
5. Ask for One-Time Settlement (OTS)
If you’ve missed many EMIs and the bank sees no payments, they might offer you a One-Time Settlement (OTS).
What is OTS?
- You pay a lump sum amount.
- The bank forgives the rest of the loan.
- You clear the account, but your credit score may drop.
Banks usually offer a 10% to 50% discount in OTS. But remember — OTS is your last resort. Only go for it if you have no option left and your income is not expected to return soon.
6. Check If You Have Loan Insurance
Many people forget that they bought loan protection insurance while taking a personal loan. This insurance pays EMIs for a specific time if:
- You lose your job
- You face a medical emergency
- You become disabled
If you have such a policy, call the insurance provider and ask how to claim it.
7. Watch Your Credit Score
Even one missed EMI can hurt your CIBIL score or credit score. This score affects future loans, credit cards, and even jobs. So, whatever step you take, keep your lender informed. Avoid defaulting without any discussion — that’s what damages your credit profile the most.
8. Take Help from a Credit Counsellor
Talk to a credit counselling agency if you are too confused or stressed. These experts help people manage their loans, plan budgets, and talk to banks on their behalf.
In India, some trusted credit counsellors include:
- Disha Financial Counselling
- Abhay Credit Counselling
- ICICI Foundation
- Bank of India’s Abhay Helpline
They give free or low-cost Help and are better than falling for fraudulent debt advisors.
What to Remember
- Don’t ignore your loan EMI.
- Always talk to the lender early.
- Avoid taking another loan to pay off the current one.
- Use official bank tools like restructuring, balance transfer, or OTS.
- Protect your credit score by being proactive.
Financial trouble can come anytime, but smart decisions can save you from long-term damage.
Source: India TV
