Personal Use Loan

What is My Payment Method for a Personal Loan?

Q: What is the impact of personal loan repayment on my credit score?

Timely repayment of personal loan EMIs improves your credit score, while delays or missed payments lower it and affect future loan eligibility.

By Tata Capital
28 November 2025
10 mins read
2193

What is My Payment Method for a Personal Loan?

Quite often you may require financial support to fulfil your dreams and aspirations. You may also need cash to meet financial obligations such as consolidating an existing debt, paying medical expenses, and meeting wedding costs, among others. Though borrowing from your social circle of family and friends seems like a viable option, the chances of a strained relationship increase in case of failure to repay the loan.

One of the best financing options is borrowing a personal loan from a financial institution or lender. The good news is that lenders do not question the intent of borrowing such a loan. You may, therefore, use it for any purpose. You may either visit your local branch or apply for a loan through the Internet. Once the application has been sanctioned, the amount is disbursed to your account. You then need to make timely repayments of the loan over the pre-determined tenure.

This naturally brings us to the key question: how do these repayments work, and what payment methods can you use for a personal loan, both of which form the focus of this blog.

What is personal loan repayment?

Before exploring the different ways you can pay back your loan, it helps to understand what is loan repayment in simple terms. Loan repayment refers to the process of returning the borrowed amount to the lender over an agreed period. This applies to all types of loans, including personal loans.

With this in mind, here is the personal loan repayment definition: it is the structured method of paying back the lump sum you received from a lender through fixed monthly instalments, commonly known as EMIs. Each EMI covers a portion of the principal and a portion of the interest charged by the lender.

Your repayment plan is finalised at the time of taking the loan. Factors such as your loan amount, chosen tenure, and applicable interest rate determine how much you pay every month. Once your EMIs begin, you are expected to make them regularly until the loan is fully settled.

In essence, the repayment of personal loan is your commitment to responsibly returning the borrowed funds within the agreed timeline, helping you maintain financial discipline and build a strong credit history.

Also, read – Ways to Plan Personal Loan EMI Repayment Smartly

3 easy methods to repay your loan EMIs

Lenders nowadays offer convenient options to pay your Equated Monthly Instalments (EMIs). Most financial institutions offer digitised methods to repay your loan. Making EMI payment through the Internet provides a great degree of convenience.

Following are three convenient methods that you may use to repay your loan.

1. Auto debit facility

The auto debit facility is one of the best methods of scheduling your payment. It saves you the effort of having to remember your due date. Besides, you need not issue a cheque every month towards payment of your dues. All you have to do is fill a form and enable your lender to activate the bank mandate. Your account will then be debited every month towards your EMI payment.

2. Post dated cheque facility

Alternatively, you may provide your lender with Post Dated Cheques (PDC). The amount on the cheque will be drawn from the account on the date written on it. This amount will then be used towards the repayment of your loan. It is, however, important to understand that PDC facility generally attracts a small fee.

3. Pay online facility

Numerous lenders provide a convenient option of paying online through the lender’s website. In order to pay your overdue Equated Monthly Instalments, you have to simply enter your loan account number or the contract number. The website displays the outstanding amount payable. You may enter the amount you wish to pay along with other details. The site will direct you to its Bill Desk for making a payment. You may then go ahead and pay your EMI through Internet banking or any other supported payment system such as a debit card.

Also, read – 5 Things You Need to Know On How to Repay Home Loan Quickly

Types of personal loan repayment options

When you borrow a loan, it is important to understand the different types of loan repayment available to you. Knowing your options helps you choose a method that matches your financial habits and ensures timely payments.

Here are the most commonly used personal loan repayment types offered by lenders:

1. EMI (Equated Monthly Instalment) payments

This is the most popular repayment method. You pay a fixed EMI every month, which includes both the principal and the interest. Since the amount stays constant, it makes budgeting easier.

2. Auto-debit / ECS (Electronic Clearing Service)

With this option, the EMI is automatically deducted from your bank account on a set date each month. It is simple, reliable, and reduces the chances of missing a payment.

3. NACH mandate

The National Automated Clearing House (NACH) mandate is another automated repayment system. It works like ECS but offers better security and faster processing.

4. Post-Dated Cheques (PDCs)

Some lenders may still allow you to submit a series of post-dated cheques for EMI payments. While this method is less common today, it remains an option in certain cases.

5. Online payments/Net banking

If you prefer manual control, you can pay your EMIs through net banking, UPI, or the lender’s online portal. This method gives flexibility, but you must remember the due dates to avoid delays.

6. Mobile app payments

Most lenders now offer mobile apps where you can view your repayment schedule, track outstanding dues, and make quick EMI payments anytime, anywhere.

Also, read – Tips to Repay Personal Loans Without Affecting Your Wallet

Benefits of timely personal loan repayment

There are several benefits of timely loan repayment, and they extend far beyond just clearing your dues on schedule. Paying your EMIs regularly strengthens your financial profile and helps you manage future credit more confidently. Here are some of the most important advantages:

1. Helps improve your credit score

One of the biggest advantages is that timely EMIs directly improve credit score loan repayment impact. Every on-time payment is recorded in your credit report, positively affecting your CIBIL score and increasing your chances of getting future loans approved smoothly.

2. Avoids late fees and penalties

Repayment of personal loan on time protects you from additional charges like late fees or penalty interest, ensuring your loan cost doesn’t unnecessarily increase.

3. Enhances future loan eligibility

When lenders see consistent repayment behaviour, it signals financial discipline. This improves your eligibility for future credit, including higher loan amounts and better terms.

4. Reduces financial stress

Sticking to your EMI schedule keeps your finances predictable and organised. This reduces the stress that often comes with overdue payments or sudden financial disruptions.

5. Prevents loan default

Timely payments keep your account in good standing and help you avoid loan defaults, which can severely affect your credit health for years.

6. Builds a positive financial reputation

Regular repayment shows that you are a responsible borrower. This reputation helps when applying for other forms of credit, whether it’s a home loan, credit card, or vehicle loan.

Also, read – Understanding and Managing Your Term Loan Repayment Schedule

How to manage your personal loan repayments effectively

Understanding how to manage personal loan repayments can make your loan journey smoother and stress-free. With the right approach and a few simple habits, you can stay organised and avoid missed EMIs.

Here are some practical tips for loan repayment that can help you stay on track:

1. Create a monthly budget

List your income, essential expenses, and EMIs. A structured budget gives you a clear picture of how much you can comfortably set aside for your repayments.

2. Set up auto-debit or NACH

Automating your EMI payments ensures they are deducted on time every month. This reduces the chances of missed or delayed payments.

3. Maintain a healthy bank balance

Keep sufficient funds in your account before the EMI date. This prevents payment failures, penalties, and negative remarks on your credit history.

4. Track your loan account regularly

Use your lender’s online portal or mobile app to monitor your repayment schedule, outstanding balance, and EMI history. Being aware helps you plan better and spot issues early.

5. Avoid taking multiple loans at once

Handling several loans simultaneously can increase your EMI load and strain your finances. Keep your commitments manageable to maintain financial stability.

6. Make partial prepayments when possible

If you receive extra funds, such as a bonus or savings, you can make a partial prepayment. This reduces your principal amount and may shorten your loan tenure.

7. Build a safety net or emergency fund

Having an emergency fund ensures you can still meet your EMI obligations during unexpected expenses or income disruptions.

8. Align your EMI with your salary date

Scheduling your EMI soon after payday helps ensure funds are available, reducing the risk of accidental payment failures.

Also, read – All You Need to Know About Business Loan Repayments

What happens if you miss a personal loan EMI?

A missed personal loan EMI can happen for many reasons: unexpected expenses, low account balance, or even a simple oversight. However, it’s important to understand what follows so you can address the issue quickly and prevent further complications.

Here’s what typically happens when an EMI is missed:

1. Late payment fees are applied

Lenders usually charge late fees or penalty interest when an EMI is not paid on time. These extra charges can increase your overall repayment amount.

2. Your credit score may drop

A missed EMI is reported to credit bureaus, and even one delay can negatively impact your credit score. This may affect your eligibility for future loans or credit cards.

3. You may receive follow-up reminders

Lenders will reach out by phone, SMS, or email to remind you of the overdue EMI. This helps ensure the payment is made as early as possible.

4. Your next month’s EMI may increase

If the overdue EMI is not cleared promptly, it may get added to the next month’s dues along with penalties, making the upcoming payment heavier.

5. Possibility of loan default if EMIs are repeatedly missed

Continuously missing EMIs can lead to loan default. The loan default consequences can be serious. Your credit score may drop sharply, lenders may initiate recovery actions, and obtaining future credit can become extremely challenging.

6. Strained relationship with the lender

Frequent delays reflect poorly on your repayment behaviour, which could affect your chances of negotiating future loan terms or applying for other financial products.

7. NACH/ECS bounce charges may apply

If your EMI is set on auto-debit, insufficient balance may also lead to NACH or ECS bounce charges, adding to your financial burden.

Also, read – Know how a smart Personal Loan repayment plan can not only give you peace of mind but also save you money!

Conclusion

Borrowing a loan is the best solution to a cash crunch. It is imperative to keep numerous factors in mind while borrowing a loan such as borrowing limit, tenure, repayment plans, and rate of interest, among others. While seeking finance, you may use a personal loan EMI calculator to determine your monthly repayment amount. You may then go ahead and use any of the convenient payment methods to clear your EMIs easily.

Repayment of personal loan becomes easier when you’re aware of the available options. Whether you choose automated payments, online transfers, or app-based tracking, the right method helps you stay organised and avoid missed EMIs. Timely payments also support your financial health and improve your credit score.

For simple, secure, and convenient loan management, visit the Tata Capital website or download the app today.

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FAQs

Can I pay my personal loan in cash?

At Tata Capital, we offer several convenient repayment options. You can make payments online through our website or mobile app anytime, anywhere. Alternatively, you can visit a nearby branch and drop off a cheque at your convenience.

What are the types of EMI payments?

Tata Capital provides a Standard EMI Plan, where you pay the principal amount and interest consistently throughout the loan tenure. This means your EMI remains the same for the entire duration of your personal loan.

What is the traditional method of loan repayment?

The most common way to repay a loan is through EMIs (Equated Monthly Instalments). It’s a simple and widely used method where you need to make fixed monthly payments. However, lenders also offer various repayment options to suit different financial needs.

What is the locking period in a personal loan?

The repayment tenure for personal loans varies across lenders. At Tata Capital, we offer a flexible repayment period of up to 6 years, allowing you to repay comfortably without putting unnecessary strain on your finances.

What are the primary methods for personal loan repayment?

The main repayment methods include EMIs via auto-debit/NACH, online payments, mobile app payments, and, occasionally, post-dated cheques.

How can I repay my Tata Capital personal loan online?

You can repay through the Tata Capital website or mobile app using net banking, UPI, debit card, or by setting up auto-debit for EMIs.

What is the impact of personal loan repayment on my credit score?

Timely repayment of personal loan EMIs improves your credit score, while delays or missed payments lower it and affect future loan eligibility.

Can I pre-pay or foreclose my personal loan?

Yes, you can prepay or foreclose your personal loan, depending on your lender’s policies. Most lenders allow borrowers to make part-payments or close the loan early after a specified lock-in period. However, it’s important to check the applicable terms and conditions before proceeding.

What happens if I miss an EMI payment for my personal loan?

You may face late fees, a drop in credit score, NACH bounce charges, and potential default if repeated.

What are step-up and step-down EMI options for personal loans?

Step-up EMIs start low and increase over time, while step-down EMIs begin higher and reduce as the loan progresses. These suit varying income patterns.

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