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Tata Capital > Blog > Personal Use Loan > What Happens If You Don’t Pay Your Student Loans on Time?

Personal Use Loan

What Happens If You Don’t Pay Your Student Loans on Time?

What Happens If You Don’t Pay Your Student Loans on Time?

Yes, student loans are the quickest and most convenient ways to finance higher education in premier institutes. Moreover, with numerous lenders in the market providing affordable education loans, funding your higher education dream has become a hassle-free process.

However, you must consider several things before applying for a loan. The most important question to ask is what would happen if you can’t pay your EMIs on time. Read on to find out.

What happens if you don’t pay your EMIs on time?

Sometimes, due to factors beyond your control, procuring a job after graduating may not be possible. It can be anything – not finding the right job, an uncertain job market, or falling short on your grades.

As a result, making timely repayments on your loan can get financially challenging, making you default on your EMI repayments. Under such circumstances, a lender might initially send you a notice regarding the pending payment. If you don’t respond, your loan will be classified as a non-performing asset (NPA).

Here’s a list of things that will be affected if this happens.

Additional Read: Things to Look Out for While Signing Education Loan Documents

Your CIBIL score takes a hit

Missing student loan EMIs during repayment will reflect poorly on your CIBIL score. A low score will significantly reduce your creditworthiness, which means lenders may hesitate to offer you loans in the future. Even if they do, you’ll be charged higher interest rates on them.

Also, bringing your credit score back up can be a time-consuming process.

You can lose the loan collateral

In the case of a secured education loan, one must pledge collateral to the lender until the loan is repaid. If you fail to repay, the lender can liquidate your pledged asset to recover their losses.

Co-borrower’s creditworthiness declines

Some lenders require a co-signer or guarantor when you apply for a personal loan for education. In case of non-repayment, the burden of the loan will fall on the co-signer of the loan. Not just that, the credit score of the co-borrower will take a hit as well, thus reducing their creditworthiness.

You may face legal consequences

Once your loan has been declared as a non-performing asset (NPA), the lender may start legal loan recovery procedures that will affect both you and the co-signer.

What can you do?

If you’re unable to pay the EMI, the best course of action would be to get in touch with the lender and explain your situation. If you’re facing financial troubles, a lender can modify your repayment schedule or postpone the EMIs until you find a job. You can use a personal loan EMI calculator to find a suitable EMI amount.

Lastly, converting your loan from an unsecured to a secured loan is also a great option, as it will significantly bring down the EMIs, making timely repayments possible.

Additional Read: A Complete Guide to Secured and Unsecured Personal Loans

Over to you

If you’re looking to fund your higher education dream, personal finance from Tata Capital can help you out. With our personal loan at attractive interest rates and easy-to-meet eligibility terms, you can seamlessly take care of your tuition fees, costs of books, airfares, and living costs.

So, why wait? Make your academic dreams a reality today!

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