What Is the Penalty for Late EMI Payment for Personal Loans
Written by Pradnya Surana
3 min read | Updated on December 02, 2025, 15:24 IST
Impact of Missing a Personal Loan EMI
When someone fails to pay an equated monthly installment (EMI), it usually creates a sense of unease and sticks as a constant botheration. Beyond this, it also attracts charges and fines.
Let's walk through what happens when someone misses an EMI and how much it can cost.
The Immediate Charges
When you miss an EMI payment, lenders impose two types of charges
Late Payment Fee
This is a flat penalty charge that gets levied as soon as you miss a payment. Most lenders charge anywhere between ₹500 to ₹1,500 per missed EMI. These charges depend on the loan amount and the lender's policy. Also, some lenders calculate it as a percentage, usually 1% to 2% of the EMI amount.
Penal Interest
With penal interest in action, it can accrue to a huge sum, thanks to compounding. Lenders charge additional interest (penal interest) on the overdue amount and this is over and above late payment charges.
Penal interest can range from 1% to 3% per month or 12% to 36% per annum on the outstanding EMI amount.
Charges and penal interest differ for each lender. Hence, it is advisable to be aware of these charges right at the time of loan application.
The Grace Period Myth
Many people believe banks offer a grace period of 3-7 days after the due date. Irrespective of this grace period, some lenders start charging penalties from day one after the due date.
The grace period is usually just for reporting the default to credit bureaus, not for waiving charges. You will still be charged late payment fees and penal interest from the moment you miss the deadline.
Loan Default Classification
As per the Reserve Bank of India’s guidelines, failed loan repayment gets classified as minor, major default depending on the duration of non-repayment.
0-29 days late
Your lender might not immediately report this to CIBIL, but you will still pay the fine.
30-59 days late
This gets reported as a minor default. Your credit score could drop by 50-80 points.
60-89 days late
Reported as a major default. Expect your score to fall by 80-110 points.
90+ days late
This is serious default territory. Your score could go down by 150-200 points, and the lender might classify your loan as a Non-Performing Asset (NPA).
After 6 months, legal action becomes likely. For secured loans, the lender can take hold of the underlying asset, like property or gold. As personal loans are unsecured, they might file a case in court. Your loan guarantor (if you have one) will also be contacted and held liable for the outstanding amount.
Impact on the Credit Score
A bad credit score means trouble getting any loan for the next few years. A default reflects in your credit score for up to 7 years. After defaulting on a few EMIs, if you apply for another loan in the immediate future, then it usually gets approved at higher interest rates.
What Can You Do to Minimise the Fine?
If you have missed a payment or think you might, depending on your situation, you can do one or more of the following actions, like
Pay Immediately
Even if you are a few days late, pay as soon as possible to stop penal interest from accumulating.
Contact your Lender
In case you have an idea of your default, be proactive and inform your lender. Many banks offer restructuring of loans.
Set up Auto-Debit
Enable auto-debit for EMIs so you never forget a payment. Just ensure sufficient balance is maintained.
Use Reminders
Set calendar alerts 2-3 days before your EMI due date as a backup.
Can the fine be waived or reduced?
In some cases, yes. If, suppose, you have a good repayment history and this is your first default due to a genuine reason (medical emergency, technical glitch, etc.), banks might waive or reduce the penalty charges, especially if you are a long-standing customer.
Some banks also have policies to waive charges if you clear all dues within a specific timeframe, say 7-10 days.
Conclusion
Late EMI charges may seem like just another bank charge, but they impact both your finances and your credit score. The damage to your credit score makes future borrowing expensive.
The smartest strategy? Never miss an EMI in the first place. Set up automated payments, maintain a sufficient balance and take your EMI due date as seriously. In case of financial difficulties, you can inform your bank; chances are they can restructure your loan.
About Author
Pradnya Surana
Sub-Editor
is an engineering and management graduate with 12 years of experience in India’s leading banks. With a natural flair for writing and a passion for all things finance, she reinvented herself as a financial writer. Her work reflects her ability to view the industry from both sides of the table, the financial service provider and the consumer. Experience in fast paced consumer facing roles adds depth, clarity and relevance to her writing.
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