What Happens When You Miss A Home Loan EMI — And How To Fix It

Whether it's a cash flow crunch or a missed auto-debit due to insufficient funds, even a day's delay can impact your credit score, attract penalties, or, in the worst case, lead to default.

Lenders generally allow a short grace period, ranging from 5 to 15 days after the due date, for EMI payments.

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A home loan is usually the longest financial commitment most people are likely to make in their lifetime. Because it can stretch anywhere from 20–30 years, staying financially disciplined and making timely EMI payments is essential, something lenders stress on from the outset. But why is this important?

Did you know a single missed EMI can have adverse financial consequences—some immediate, others long-term? Whether it's a cash flow crunch or a missed auto-debit due to insufficient funds, even a day's delay can impact your credit score, attract penalties, or, in the worst case, lead to default. Let’s dive into the topic of loan defaults and why these can be more harmful than you think.

What happens when you miss an EMI?

Lenders generally allow a short grace period, ranging from 5 to 15 days after the due date, for EMI payments. Failing to pay during this period means you’ll likely face a penalty. The grace period varies across banks, so confirm it with your lender at the beginning. Late payment charges, on the other hand, typically range from 1–2 per cent per month on the overdue amount. For instance, if your EMI is Rs 45,000 on a Rs 50 lakh loan, a 2 per cent monthly penalty means Rs 900 for just one missed payment.

Next comes the hit to your credit score. A drop of 30–50 points can make it harder to secure future loans or lead to loans being offered at higher interest rates. The missed EMI is recorded on your credit report and will be visible to future lenders even after you’ve resumed making timely payments.

If you’ve missed making EMI payments for over 90 days, it is considered a major default, which can do severe or irreparable damage to your credit score. In case of a major default, banks typically send you a legal notice. If you fail to respond, it can lead to legal action, which sometimes ends with an auction of the mortgaged property.

Missed EMIs and credit score damage

Your credit score reflects your overall credit behaviour, including how consistently you repay, how much credit you use, and how you manage debt over time. This means any missed EMI is recorded and can lower your score. For perspective, a drop from 780 to 730 may not seem drastic, but it can shift you into a higher-risk bracket for lenders.

For example, someone with a score above 750 might be offered a home loan at 8.5 per cent, while another with a score below 720 could be charged 9.5 per cent or more. On a Rs 50 lakh loan for 20 years, that 1 per cent difference adds up to over Rs 6.5 lakh in additional interest. So, a missed EMI today can cost you lakhs in the future.

Your bank may have solutions

Missing an EMI doesn’t mean you’re out of options. Emergencies, like a sudden medical expense, job loss, or meeting the deadline for your child’s school fees, can force you to redirect funds. If that happens, contact your bank immediately and explain your situation. Many lenders offer hardship solutions such as EMI rescheduling, short-term moratoriums, or loan restructuring to help borrowers stay on track.

Here’s a real-life example. Suppose you lose your job while you have a Rs 40,000 EMI to pay. If you reach out early, your lender may allow you to reduce it to Rs 25,000 for six months, with the difference adjusted later. But these solutions are only possible if you act in time. The longer you delay, the fewer options you may have.

Missed a home loan EMI? Here’s what to do

Missing an EMI can feel stressful, but prompt action can help you limit the fallout. Here’s what you can do:

• Inform your bank immediately
  If you’ve missed an EMI, contact your bank immediately and explain the reason. Most lenders will be supportive if you’re honest and communicate promptly.
• Make the payment without delay
  If you’ve missed the EMI payment due to a one-time slip, like forgetting the due date or insufficient balance, repay it quickly. Also, set up auto-debit to prevent future misses, but make sure your account always has enough funds.
• Faced with financial setbacks? Cut costs fast
  In case of job loss or reduced income, act fast. Dip into your emergency fund for EMI payments. Start looking for work and cut non-essential expenses. If absolutely necessary, liquidate low-yield investments to stay on top of repayments.
• Ask for loan restructuring
  Request loan restructuring to extend the tenure and reduce your EMIs, or ask for a moratorium of up to six months. Lenders are more willing to help when you act early and explain your situation clearly.
• Consider a rental workaround
  If the pressure is mounting, consider moving to a smaller rented home and letting out your current property. The rental income can help you continue paying EMIs and avoid default or legal trouble.
• Consolidate your debt
  If you're managing multiple loans, think about consolidating them or refinancing at a better rate. Staying one step ahead can prevent long-term financial strain.

Missing a home loan EMI isn’t a minor slip. It reflects gaps in your creditworthiness, which is a red flag for lenders. While a single delay can be managed, repeated misses may lead to serious financial consequences. The good news is that timely action and clear communication can help you stay on track and protect your credit health.

(The author is the CEO at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)