If I don’t Repay my Education Loan EMIs on time, What Will Happen?

Pursuing quality education is a pricey affair, thanks to spiralling costs in this particular sector. The problem further intensifies when one wants to study abroad. To bridge the gap between aspiration and shortage of funds, individuals often need to opt for an education loan. 

  • The total education loan market in India reached Rs.93,000 crore in 2020. 
  • Almost Rs.11,000 crore study loans were disbursed within 12 months through September 2020. 

While the demand for this credit is on the rise, irregular repayment or non-repayment, in that case, can cost a borrower significantly. 

Hence, it will be wiser for students to assess their loan repayment capacity before applying for the funds. 

Effects of missed EMI payment of an education loan and how to combat it

Conventionally, an education loan is either unsecured or secured in nature. Irrespective of the loan type, timely repayment is the first requisite of availing the funds. In case individuals fail to repay the loan or miss paying EMIs on time, they have to face some consequences, depending on the lender’s terms of conditions and type of loan chosen. 

An education loan calculator is one of the most crucial aspects that any borrower must understand before opting for such loans. This online tool enables a borrower to compute his exact liabilities based on the terms quoted by a particular financial lender. Thus, one can take an informed decision regarding the same.

  • Consequences of failing to pay unsecured education loan 

A large number of students resort to unsecured lending options to manage their finances better while studying abroad or within the country. However, individuals who require a limited quantum generally opt for such an education loan. 

If the borrower misses consecutive EMI payments or fails to repay the loan within tenor, the lender first sends a notification to him/her. If the borrower does not respond or contact the lender, that borrower is marked as a loan defaulter after a certain period. 

Consequently, the credit score of the borrower reduces drastically, and he/she may not qualify for a new loan in the future if the penalties and outstanding amount are not settled. 

However, such things do not happen when one opts for a loan against property for education. 

  • Consequences of non-payment of study loan with a guarantor

Financial institutions may ask for a co-signer or guarantor before approving an education LAP loan in case the amount is higher. When you opt for an education loan eligibility with a guarantor. 

However, when you stop paying the EMIs for such a loan, the lender sends you and your guarantor warning notices. If both of you ignore the reminder, the lender marks your loan as NPA after waiting for a particular period. 

It also affects the CIBIL score and future borrowing ability of both you and your co-applicant. Moreover, a lender may also start preparing a legal proceeding against you to recover the due amount. 

To avoid such scenarios, individuals can use a LAP EMI calculator that computes the amount they have to pay as a monthly instalment. You can also read more about how a mortgage loan influences your CIBIL score. 

  • Consequences of non-payment of education loan against property  

Students who require a high corpus often opt for a loan against property wherein they have to pledge a collateral to acquire funds. While availing this loan is easier due to the security involved, repaying the same can be challenging if you do not know the ways to ensure that you don’t default on your loan against property. 

Hence, first, you need to check for lower mortgage loan rates that can help in clearing the debts easily. 

Even if you cannot repay the loan, the owners may acquire the entitlement to possess the ownership of the pledged property, legally, after declaring it an NPA. 

Individuals can tackle this issue strategically, for instance, by opting for a balance transfer facility. It will ensure a lower property loan interest rate and better terms of service. These loans are also comparatively more easily available owing to the relaxed eligibility requirements.

Further, HFCs also provide pre-approved offers that make availing this credit straightforward and prompt. Such offers are available on a range of financial products like loans against property, home loans, and others. You can check your pre-approved offer by mentioning some basic credentials. 

Therefore, it is essential for you to check your repayment capacity and overall cost of borrowing before applying for an education loan. You should also compare different lenders to avail a competitive interest rate that facilitates smooth repayment. 


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