Overdue Payment – Meaning, Impact, and More

Loans have become a staple way to address financial problems in Indian households. After taking a loan, borrowers repay the lender in monthly installments which include the principal amount and the interest. 

In this article, we will look into the loan overdue amount, its meaning, and the consequences of the overdue loan.

What Is Overdue Payment In Loan?

As an Individual or a business, you will face financial hardships time and again. During those trying times, loans offer a way out by providing timely help and a structured repayment process.

Borrowers avail a loan from a lender and over a period, repay the loan in monthly installments. However, there are instances when borrowers can’t repay the loan in due time for several reasons.  

The amount that borrowers fail to repay within time is known as the overdue amount

How Does Overdue Payment Impact Credit Score?

A single missed payment can lead to losing months of hard work as it will drastically reduce your credit score. If you are unable to pay your EMIs on time, it attracts a late penalty, increasing your overdue amount. 

Additionally, in the case of secured loans, borrowers can lose their security if they miss repaying the loan. The lender first sends a 60-day notice to remind you of the overdue amount and the deadline. 

If they don’t receive the amount within the stipulated time, the lender has the right to auction off the asset pledged as collateral to retrieve the overdue amount. 

The notice the lender sends beforehand contains all the information about the auction, including the Current Value of the Asset, the time and date of the Auction, and more. 

If the borrower thinks the item is undervalued, he or she may contest it. Additionally, after collecting the loan overdue amount, lenders must pay back any excess funds (if any) to customers.

How To Clear Loan Overdue?

If you have a loan overdue amount and wish to clear it, the first step to follow is to get in touch with your lender. 

Explain your financial situation and renegotiate the terms of the loan. The lender might offer you another way to repay the loan or change your terms to suit your situation. 

Moreover, if your financial condition is not good, then the lender might provide a permanent solution in the form of payment restructuring. You can also get an extension on the loan to make timely payments. 

However, if you have too many loans and are finding it difficult to clear them, then loan consolidation is the way to go. Several banks offer this smart solution to ensure borrowers repay loans. 

As a last resort, you can consider loan settlement. Loan settlement allows you to pay only a part of your loan to the bank and the lender will consider the loan settled. 

However, keep in mind that settling your loan has severe consequences apart from decreasing your credit score. It will stay on your credit report for several years, affecting your chances of securing a loan in the future.


It is wise and safe to repay your dues on time to avoid loan overdue and its extreme impact on credit score. If push comes to shove, there are several options at your disposal to help you overcome the situation. You can also opt for personal loan insurance to protect you in dire financial circumstances. 

Overdue Payment - Related FAQs

Cash constraints are generally the main reason behind loan overdue. When borrowers are strapped for cash, they tend to miss a payment or two to compensate for other requirements. 

As a borrower, if you are unable to repay the loan under any circumstance, you can contact the lender and discuss a settlement. However, looking for other means and repaying the loan is wiser than settling it.

Lenders charge additional interest or penal interest every month on the overdue amount. Hence, avoiding paying loan installments leads to more debt. 

Overdue amounts can lower your chances of getting another loan. However, before taking a loan to clear your past debt, you must first build a safety net to pay off the EMIs of the new loan. 

Any form of delinquencies, such as late repayments, settlement, or missed EMIs, stay on your report for 7 years from the day of the issue. 

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