How does an EMI bounce affect my credit score?

Answer

A:

An EMI bounce happens when your bank account doesn't have enough balance to cover a scheduled EMI (Equated Monthly Installment) payment. This failure to pay can negatively impact your credit score and overall financial credibility.

Here's how it affects your credit score:

1. Negative Reporting to Credit Bureaus (CIBIL, Experian, etc.):
   When an EMI bounces, the lender usually reports it to credit bureaus. Even a single missed payment can lower your credit score by 50 to 100 points depending on your overall credit history.

2. Penalty Charges and Late Fees:
   Along with the EMI amount, you will also be charged penalty fees by both your bank (for dishonoring the ECS mandate) and the lender. This adds to your financial burden and may affect your repayment capacity.

3. Loan Classification as “Delinquent” or “Default”:
   If the EMI continues to bounce for more than 90 days, the loan may be classified as a Non-Performing Asset (NPA). This severely damages your credit profile and reduces your chances of getting future loans or credit cards.

4. Reduced Loan Eligibility in Future:
   A low credit score due to bounced EMIs means banks and NBFCs may reject your loan applications or offer loans at much higher interest rates.

5. Legal Action in Some Cases:
   Repeated EMI bounces, especially on secured loans like home or auto loans, may lead to legal notices or recovery action by the lender. In extreme cases, lenders can even initiate asset seizure or court proceedings.

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How to Avoid EMI Bounces:

• Maintain sufficient balance in your bank account before the EMI due date.

• Set payment reminders or opt for auto-debit features.

• Restructure the loan if you’re facing financial difficulty.

• Talk to your lender early to avoid legal or credit damage.

• Learn more and get the expert support you deserve:
  Visit: www.legals365.com
  Call: +91 9625961599
  
  Questions? Advocate B.K. Singh and the team are here to support you!

Conclusion:
An EMI bounce might seem like a small issue, but it can leave a long-term dent on your credit score and financial reputation. Timely EMI payments are essential to build and maintain a strong credit profile.

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