EMI late payment charges: Can missing your loan EMI by just one day hurt your credit score? Know what the rules say

Borrowers should not assume that a one-day delay will be overlooked or that a grace period automatically exempts them from late-payment charges. (AI-generated image used for representational purpose.)AI Quick ReadMissing a loan EMI by even one day can make a borrower's account overdue and potentially attract late-payment charges. It may also create a risk of adverse credit reporting, although a one-day delay does not automatically lead to an immediate drop in the borrower's credit score.

The impact depends on the lender's reporting practices, the duration of the delay and the borrower's repayment history. While a short delay may have a limited impact on the credit score, repeated late payments can affect a borrower's creditworthiness and make future borrowing more difficult.

The Reserve Bank of India (RBI) requires lenders to classify an account as overdue if the amount due is not paid by the end of the day on the due date. However, the date on which an account becomes overdue and the date on which the delay appears in a credit report may differ because credit information is reported to bureaus on a prescribed schedule.

Borrowers should not assume that a one-day delay will be overlooked or that a grace period automatically exempts them from late-payment charges.

“Even though the lender may extend you the benefit of the grace period, they may not waive the penalty charged against the delay,” said Santosh Agarwal, CEO, Paisabazaar.

The charges applicable to a delayed EMI depend on the lender's loan terms and applicable rules. Borrowers should check their loan agreement to understand the charges for delayed repayment and whether any grace period applies.

RBI rules require regulated lenders to follow their disclosed policies on penal charges. These charges must be reasonable and cannot be capitalised, which means lenders cannot add them to the loan principal and charge further interest on them. Penal charges are distinct from the regular interest payable on a loan.

A one-day delay may not significantly affect a borrower's credit score immediately, but repeated delays can hurt the credit profile over time. The longer a payment remains overdue, the greater the potential consequences.

“Lenders report credit information to bureaus on the applicable reporting schedule, and the impact on your credit score is reflected only when the bureau acts on the information it receives. A one-day delay may not impact your credit score significantly, but frequent delays may lead to a fall in your credit score over time,” Agarwal said.

Since 1 January 2025, RBI has required lenders to update credit information with credit bureaus every fortnight, or at shorter intervals where mutually agreed. This allows credit reports to reflect changes in borrowers' repayment status more frequently than under the earlier monthly reporting framework.

Agarwal cautioned that the impact on a credit score becomes more serious as the repayment delay increases. An overdue payment extending beyond 30 days can significantly damage a borrower's credit profile, while prolonged non-payment can make future borrowing more difficult.

A loan account generally becomes a non-performing asset (NPA) when interest or principal remains overdue for more than 90 days, subject to the applicable prudential norms and loan classification rules. This is a separate classification from the initial overdue status of an EMI.

Borrowers who anticipate difficulty in making a repayment should contact their lender before the due date and discuss the options available under their loan agreement and the lender's policies. Any moratorium or restructuring option would depend on the lender's eligibility criteria and applicable rules.

“If a due date is missed by a few days, the repayments should be made immediately to mitigate the impact on the credit score,” Agarwal said.

Borrowers should also check whether the payment was successfully processed, particularly if the EMI was scheduled through an automatic debit. If a payment fails because of insufficient funds or a technical issue, they should contact the lender, pay the outstanding amount as soon as possible and confirm whether any charges have been levied.