LAS EMI Default: What Really Happens If You Miss a Payment?

Missing a loan EMI can feel stressful, but with a Loan Against Securities (LAS), the implications are notably unique. Unlike regular loans, your investments act as collateral, making defaults especially tricky. 

Imagine you miss an EMI payment due to unforeseen expenses – a medical emergency or unexpected repair. Now your valuable securities, like mutual funds or shares, might be at stake. 

Key Takeaways

• Missing a LAS EMI can trigger margin calls and potential forced liquidation.
• Your credit score and future borrowing capabilities could deteriorate.
• Loan terms might be altered or access to your funds restricted by lenders.
• Prompt action and clear communication with your lender can mitigate consequences.

What Happens Immediately After Defaulting?

If you default on your Loan Against Securities repayment, repercussions begin almost immediately, affecting you financially and mentally.

Will You Face Penalties?

Yes, missing your EMI incurs immediate penalties. Typically, lenders impose late fees and penal interest, ranging around 2% to 3% per month on overdue amounts. For instance, if your monthly EMI is ₹10,000, a delay might quickly add an additional ₹200-₹300 monthly, escalating your financial burden.

How Does it Impact Your Credit Score?

If your EMI remains unpaid for over 30 days, lenders report it to credit bureaus like CIBIL and Experian. Even a single reported default can significantly drop your credit score, potentially affecting future loan approvals and interest rates offered by other financial institutions.

Will Your Loan Account be Frozen?

Yes, repeated or unresolved defaults can lead lenders to restrict further withdrawals from your LAS account. This means you won’t be able to access additional funds or drawdowns until you settle the overdue payments.

Can Your Securities Be Sold After Default?

Post-default, your pledged securities are vulnerable, putting your investment goals at serious risk.

What is a Margin Call?

A margin call is an alert from your lender when the value of your collateral falls below the required threshold due to defaults or market fluctuations. You’re then required to either deposit additional securities or repay part of your outstanding loan to restore balance.

When Does Liquidation Occur?

If you fail to act within 1-3 days of receiving a margin call, lenders can liquidate your pledged mutual funds or shares. You'll receive notifications via SMS, email, or registered post prior to liquidation. 

Are There Additional Recovery Charges?

Yes, if the lender initiates legal action or hires third-party collection agencies, you're liable for associated costs. These can include legal fees, administrative charges, and other related recovery expenses, further escalating your financial obligations.

How Can You Avoid or Manage This Situation?

You have options to avoid or resolve an EMI default situation, preserving your financial health and investments.

What Support Options Do Lenders Offer?

Many lenders provide temporary relief measures, such as EMI deferment, restructuring, or adjusting repayment schedules during financial hardships. It's crucial to engage proactively and transparently with your lender at the earliest opportunity for beneficial solutions.

Can Refinancing Your LAS Help?

Refinancing through balance transfer or top-up loans can consolidate debts and potentially reduce monthly EMIs. Explore refinancing with lenders offering competitive rates and flexible repayment terms to ease financial stress. Learn about LAS refinancing options here.

Is Pre-closure of Your Loan Advisable?

Pre-closure eliminates ongoing risks associated with LAS defaults. Evaluate pre-closure fees and compare them against long-term risks and additional penalties. Quicklend offers flexible terms with minimal charges to support your decision.

Conclusion

Defaulting on your LAS EMI has significant consequences but knowing your options and responding promptly makes a substantial difference. At Quicklend, we emphasize transparency, flexibility, and customer support.

This is general guidance. For personalized loan advice, contact our team at Quicklend.