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Understanding EMI Bounce: Its Meaning, Charges, & Consequences
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If you receive an EMI bounce message , pay the EMI manually using another payment method. However, the bounce charges may apply if the attempt has exceeded the due date.
Missing an EMI affects your credit score negatively. Each EMI bounce reduces the credit score by a few points, and three continuous missed EMIs become a major default.
While paying the EMIs immediately after a bounce can help minimise the negative impact on your credit score. However, you will still be liable to pay late payment fees or penalties.
Missing your EMIs can impact your credit score negatively. Since lending institutions largely depend on your credit score to determine your credibility, it automatically affects your future loan applications.
Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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What is EMI Bounce?
When you borrow a loan, you must repay it to the lender with interest in Equated Monthly Instalments (EMIs). The lending institution divides the total loan cost by the number of months you select in your repayment tenure. You must pay this fixed EMI amount each month before a due date. However, if the EMI payment fails, it causes an EMI bounce. The lender imposes EMI bounce charges as applicable according to their policy.
Causes of EMI Bounce
Now that you understand the EMI bounce meaning, let’s look at the possible reasons for a bounce. These include the following:
What are the Consequences of Home Loan EMIs Bouncing?
Missing EMI payments can have severe consequences for your credit score. Lenders report missed payments to credit bureaus, which can negatively impact your creditworthiness. This can make it difficult to obtain future loans and may result in higher interest rates.
Key consequences of bouncing home loan EMIs:
It's crucial to avoid bouncing home loan EMIs to maintain a healthy credit score and ensure smooth financial transactions in the future.
EMI Bounce Charges
You must pay EMI bounce charges according to the lender's policy whenever you miss an EMI. The loan company usually adds these charges to your loan dues, which increases the total amount you must repay. Repeated defaults negatively impact your credit score and lead to higher loan costs by the term-end. Usually, it is a fixed amount.
How to Avoid EMI Bounce Charges
After understanding EMI bounce meaning and charges, learning how to avoid them is important. Here are a few steps you may take:
Conclusion
Missing your Home Loan EMIs reduces your credit score and attracts EMI bounce charges. Automate payments and maintain sufficient balance to avoid EMI bounce. If you've missed an EMI, consider increasing your subsequent EMI payments to make up for the shortfall.
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