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What to Do If You Miss a Car Loan Payment

What to Do If You Miss a Car Loan Payment

Summary: When you miss your car loan EMI, the lender will impose penalties and mark default in the credit report. So, you would want to act quickly to prevent the situation from worsening. First, start by paying the overdue amount. Then, discuss the various available options with your lender. Additionally, always pay your EMIs on time to restore your repayment records. 

A single missed payment does not necessarily mean your loan has become in default, but it leads to applicable late-payment charges and affects your credit profile if the overdue amount remains unpaid. Understanding what happens if you miss a car loan EMI helps you take the right action before the situation turns irreversible.

On missing car loan EMI, you should check the overdue amount and contact the lender immediately. Pay missed EMIs with relevant applicable charges, and reduce additional impact on your credit score.

First: One Missed EMI Is Not a Default

Missed car loan EMI does not mean the loan will automatically be considered as NPA. It may result in bounce or late charges, carry the penalty interest rate and impact your CIBIL score if the overdue amount remains unpaid.

The situation is recoverable when you take immediate action. Under the RBI norms, the loan is classified as NPA when the amount remains overdue for over 90 days.

What Happens When You Miss a Car Loan EMI: The Timeline

The longer a payment remains overdue, the more serious the consequences of missing an EMI tend to become. The following are the situations you can expect at different stages:

  • Day 1 Onwards: Your lender charges a bounce or late-payment fee along with penal interest, according to the terms of your loan agreement. The account may be considered as SMA-0. It means that the amount remains overdue by up to 30 days. You may also get reminder calls or SMS and it may affect your credit profile.
  • Around 30 Days: Any delay EMI gets reported in credit as days past due (DPD).  It affects your CIBIL score more than a short delay. Note that lenders may update your credit profile periodically, so the reporting may not happen immediately.
  • 31–90 Days: If an account is overdue for a period beyond 30 days but still within 60 days time, then it is categorised as SMA-1. It will be categorised under SMA-2 if the period of delay ranges around 60 to 90 days. The recovery communications may become more frequent as the overdue period increases. 
  • More than 90 Days: As per the RBI provisions, overdue amount remains unpaid for over 90 days may classify the loan Non-Performing Asset/Non-Performing loan (NPA/NPL). According to that, the lender could take over the possession by agreement and go for recovery with secured car loans.

The consequences of the car loan default may depend on the lender, loan agreements and repayment history. So acting quickly after missing car loan payment may help to prevent the account from moving to later stages.

Late Payment Charges and Penalties

The car loan penalty charges may vary from one lender to another as stated in your loan agreement and Key Facts Statement (KFS). A delayed EMI may lead to late-payment or bounce charge, along with penal interest on overdue amount. Cheque or NACH mandate failures lead to separate charges.

For example, Tata Capital currently imposes a charge of 3% per month on the outstanding amount when car loan payments are late, a fee of ₹600 for each dishonoured payment instrument, and a charge of ₹450 for each rejection of a mandate, together with the relevant taxes. These amounts are specific to the lender and must not be regarded as the standard car loan late payment charges India.

The longer an EMI remains unpaid, the more your late-payment costs can accumulate. Along with charges and interest, prolonged unpaid status will increase your repayment burden and negatively impact your credit history. Instead of estimating the payable amount, you should check the latest list of charges set by the lender and make the informed financial decision.

What to Do Right Now: A Step-by-Step Plan

If you miss an EMI, it is suggested to take quick action and reduce credit impact. Here are the steps to help you out:

  • Step 1: Do Not Ignore It: Contact your lender to get the loan, overdue EMI, and applicable charge details with payment deadline. Delay on repayment will definitely increase the liability.
  • Step 2: Pay the Overdue EMI and Applicable Charges: If you have missed your loan EMI, you may pay it later through the lender’s online bank website, mobile banking app, payment gateway, or by visiting their branch. If you have any difficulty in making the missed payment, always refer to the lender’s instructions rather than using any unverified payment links.
  • Step 3: Contact Your Lender Immediately: Explain the reason for late payments to the lender. Also ask about the waived applicable charge for a first-time issue or a technical payment failure.
  • Step 4: Ask About Repayment/Tenure Extension: If you are unable to clear the overdue amount, you must check the loan restructuring options with the lender. Do not assume these options are guaranteed.
  • Step 5: Plan for Future Cash-Flow Squeeze: Ask whether the EMI date set by the lender is aligned to your salary date.  Never assume borrowing will help until you evaluate your cost and repayment ability.
  • Step 6: Set Up Auto-Pay and Reminders: You can use the reminders for the additional safeguard. Allow an authorised auto-debit from your account, and ensure that you have enough money before the due date. Calendar reminders can provide additional support.

Know Your Rights as a Borrower

Missing an EMI does not lose your rights as a borrower. Recovery agents always adhere to the RBI guidelines, only call you between 8 AM and 7 PM and do not abuse, harass, threaten or publicly humiliate you. Repossession and recovery should follow the legal procedures.

In a car loan, the contract should state the notice requirements, repossession rights and process for taking possession. The court recognised that financiers have the right to take possession where the agreement allowed, but it has opposed the use of illegal action as a way of recovery.

If the recovery agent is doing things incorrectly, you can raise the complaint with your lender. If the matter remains unresolved, you can move forward by using the RBI’s Integrated Ombudsman Scheme.

Make sure to keep all records of calls, messages, and payments and use the verified lender’s official channels while dealing with late payments car loan issues in India.

Repairing the Damage to Your Credit Score

A missed car loan EMI affects your CIBIl score and appears in the credit report. With consistent and timely payments, you can reduce its impact over time. There is no instant way to erase an accurate missed-payment entry.

Begin by clearing the overdue EMI with any relevant charges, and then make all future payments on time. Maintaining a low level of credit utilisation can also improve your credit management.

If your report contains an inaccurate missed payment entry, you can raise an objection with the credit bureau and request that the lender verify the details. Accurate payment records cannot be removed on request. CIBIL always takes the lender confirmation before delete or change any records. So, be aware of any service that claims to repair your credit score quickly. Recovering from the car loan default consequences of missed payments may require patience and consistent repayment records.

How to Avoid Missing Future EMIs

Below are the some of good habits to adopt to avoid missing future EMIs:

  • Set up Auto-Debit: Use an authorised auto-debit. Ensure that there are sufficient funds in your account before the due date.
  • Align the EMI Date: Ask the EMI date from the lender, and ensure that it should be aligned to your salary date.
  • Maintain a Buffer: Ensure to have enough savings to pay the least 1 or 2 EMIs. Also, check your loan balance regularly to track the outstanding repayments amount.
  • Set Reminders: Set the calendar alerts or inform the bank to seek the extended deadline for EMI.
  • Act Early if Finances Change: If your finance changes, you should speak to the lender immediately rather than waiting for payment to miss. Discuss the available repayment options to the lender. You can avail the top-up options, if you need additional funds to make loan payments. 

Conclusion

Wondering what to do if you miss a car loan EMI begins with knowing that missing one EMI does not automatically mean that your loan has become an NPA. The longer you delay, the greater the potential car loan default consequences.

Pay the overdue amount as quickly as possible, discuss with the lender and find out available repayment plans. Improving your CIBIL score takes time, so you must maintain the history of timely and consistent payments. 

If you still have questions about what happens if you miss car loan EMI, you can head over to Tata Capital, discuss your financial status and understand the available options in loan terms.

Disclaimer: This article contains the  general information only, not legal or financial advice. Timelines, charges and relief options may vary between lenders and changes over time. Contact the lender always to get the latest information and verify your loan agreement.

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FAQs

What happens if I miss one car loan EMI?

The loan amount becomes overdue and late or bounce charges may be added if you miss an EMI. The lender sends you a payment reminder to clear overdues amount.

Will one missed EMI hurt my CIBIL score?

Yes, the missed EMIs put a negative impact on your credit score. Your lender reports this account to credit bureaus with duration how long the payment that remains overdue.

What are the penalty charges for a late car loan payment?

Penalty fees vary from lender to lender. It depends mainly on your loan agreement. They may include late or penalty charges and bounced cheque charges. For car loans, Tata Capital imposes the penalty charge of 3% per month on the defaulted amount and 600 per dishonoured payment instrument.

When does a car loan become a default (NPA)?

For car loans, a loan that has a payment overdue for more than 90 days is considered as non-performing (NPA) for the bank. It can be classified as SMA-0, SMA-1 or SMA-2 if the account becomes an NPA, subject to duration for which the payment is overdue.

Can my car be repossessed if I miss an EMI?

No, missing single EMI does not repossess the car automatically. The process of repossessing the car is decided on the basis of factors such as the applicable legal procedures, loan agreements and extent of the default. The financier can repossess the vehicle under the legal and contractual framework.

What should I do if I can't pay my EMI?

If you cannot make timely EMI (loan installment) payment, contact your lender immediately. Explain the financial problems you face and ask for other repayment options. If the difficulties continue, you can discuss the appropriate EMI agreement rather than allowing the several overdue EMIs to accumulate.

Can I get a missed-EMI entry removed from my credit report?

An accurate missed payment record cannot simply be removed because you request it. If the information is wrong, you can raise a dispute with the credit bureau and the lender. As per TransUnion, CIBIL changes need confirmation from the relevant credit institution.
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