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Overdue Payment: What It Is and How It Impacts Your Finances

Overdue Payment: What It Is and How It Impacts Your Finances

Anuj took out a loan to purchase his dream car, and for months, he stayed on top of his EMI payments. But just before his fifth payment was due, life took an unexpected turn. A medical emergency threw his finances off balance, and before he knew it, he missed the payment deadline.

This is known as an overdue payment. Simply put, an overdue payment occurs when a borrower fails to pay on or before the due date. While it might seem like a small slip-up, overdue payments can quickly snowball, leading to serious consequences. These can include a damaged credit score, higher interest rates, late fees, and in some cases, even legal trouble.

To avoid these issues, it’s crucial to understand what an overdue payment is and how it can affect your finances. In this article, we’ll explain in detail what overdue payments are, the potential consequences, and how you can avoid them altogether.

What is Loan Overdue Meaning?

A loan is considered overdue when the borrower misses the scheduled repayment date. In simple terms, it means the EMI or installment wasn’t paid on time.

There are several reasons why this might happen-

  • The borrower may be facing a financial crisis, such as a job loss.
  • Some borrowers forget the due date, especially when they have multiple bills to manage.
  • Others may delay payment intentionally due to dissatisfaction or a dispute.
  • In some cases, a payment might fail because of technical issues, like a failed transaction or a delay from the bank’s side.

Difference between Overdue and Outstanding Payments

Some people often use the terms overdue payments and outstanding payments interchangeably, but they’re not the same. The table below outlines the key differences between the two.

AspectOutstanding PaymentOverdue Payment
MeaningThe amount that is yet to be paid but still within the due dateThe amount that has not been paid after the due date has passed  
Due datePayment is pending, but not latePayment is late and past the due date
Late feesNot applicable if paid on timeMay attract late fees or penalties
UrgencyLess urgent, as the due date hasn’t arrived yetRequires immediate action to avoid further consequences
Common examplesUpcoming EMIs, bills, or invoices due next week Missed credit card bill, EMI, or utility payment that was due a few days ago

What are the Effects of an Overdue Payment?

In case a borrower fails to clear scheduled payments, it can have severe consequences.

  • Late fees- If you have several unpaid EMIs, lenders may charge late fees. These fees are usually a small percentage of the overdue amount and can quickly add up, increasing the total balance owed.
  • Damage to credit score- Your payment history directly affects your credit score. Missing a payment can lower your score, which could impact your ability to qualify for mortgages, loans, or credit cards. A lower score may also result in higher interest rates on future credit applications.
  • Legal action and debt collection- If payments remain overdue for an extended period, lenders may start collection calls or even take legal action to recover the debt.
  • Increased interest rates- Lenders may raise the interest rate on your loan as a penalty for overdue payments, increasing the total cost of the loan and making it more difficult to repay.
  • Restricted access to future credit- A history of late payments can reduce your ability to secure credit on favourable terms in the future. It may also take time to remove the overdue mark from your credit report, so it’s best to avoid it.

How to Avoid Overdue Payments?

Here are a few ways to stay on top of your loan repayments and avoid overdue payments:

  1. Set up automatic payments: Enable auto-debit or automatic payments so that your EMIs are paid on time each month. This takes the pressure off remembering due dates and helps you avoid missed payments.
  2. Prioritise loan repayments: Make repayments of loans a priority in your financial planning. Paying off loans on time should be one of your top financial commitments to avoid penalties and long-term consequences.
  3. Stay in touch with your lender: If you’re facing financial difficulties and can’t make a payment on time, inform your lender in advance. They may be able to offer some flexibility, such as extending the due date or adjusting your repayment terms.

But if you already have overdue payments, start by assessing your current financial situation to see how much you can pay immediately. Another option is to apply for a personal loan. A personal loan can help you clear overdue payments through debt consolidation. If you have multiple pending dues, you can combine them into one loan and repay the EMIs more easily.

At Tata Capital, we offer personal loans with high loan amounts, attractive interest rates, and flexible repayment tenures. You can also utilise our personal loan EMI calculator to estimate your monthly installments and plan your budget more effectively.

To apply for a personal loan, visit our website or download our app today!

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FAQs

How late can you be on a personal loan payment?

Lenders usually offer a short grace period after the due date. However, if the payment isn’t cleared within that time, late fees and other penalties may start to apply.

Can I go to court for not paying my personal loan?

If personal loan payments are missed over an extended period and recovery efforts fail, the lender can file a case in civil court to recover the dues.

How bad is a late loan payment?

A late loan payment can negatively affect your credit score and attract late fees. If the delay continues, it may impact your loan eligibility in the future and result in collection calls or legal notices from the lender.

How do I settle an overdue loan?

A smart way to clear overdue payments is through debt consolidation. With this option, you can use personal finance to merge all your existing debts into one, which you can then repay through manageable EMIs.