Effect of EMI Moratorium on Your CIBIL Score

Meanwhile on March 27, 2020, the Reserve Bank of India (RBI) issued a directive to provide a moratorium of three months on all outstanding term loans. The moratorium would begin from March 1, and end on May 31, the central bank said. But, later the moratorium was further extended to another 3 months – till August 31, 2020.

You must note that the moratorium is not a waiver of the outstanding loans, but only an extension – a period where you can opt for non-payment of your dues without any negative impact. If you have opted for the moratorium, you will not have to pay your outstanding loans till August 31. And this non-payment will not result in imposition of penal charges, your Credit Score will also not be affected. The interest charges, however, would continue to accrue.

What is CIBIL Score?

Your CIBIL score can range from 300 to 900, and is primarily based on your credit repayment history. The score - reflecting your creditworthiness - is prepared by credit information companies, like TransUnion Credit Information Bureau of India Ltd (CIBIL). A CIBIL score of 750 is considered good. Your CIBIL score is of paramount importance when it comes to getting loans approved from financial institutions, like banks and Non-Banking Finance Companies (NBFCs). With a good CIBIL score you will get quick approval of all types of loans, including unsecured loans. You can even be in a position to negotiate the rate of interest on the loan with the financial institution.

What segments are covered under RBIs moratorium?

RBI’s moratorium covers all types of outstanding term loans, along with EMIs, bullet repayments, and credit card dues. It encompasses all retail loans, like home loans, personal loans and automobile loans. The moratorium has to be provided on the outstanding dues by all commercial banks, All-India financial institutions and NBFCs, including housing finance companies and micro-finance institutions.

Will non-payment of EMIs cause my CIBIL score to crash?

The central bank has made it clear that non-payment of EMIs during the moratorium will not affect your CIBIL score. But if you fail to pay the EMIs after the moratorium period, then it will have an adverse impact on your CIBIL score.

After August 31, non-payment of EMIs can affect your credit score as outlined below:

  • 30 days delay in paying EMIs – While you can get a lot of phone calls from the lender to clear your dues, there will be no change in your CIBIL score. This is because credit information companies will not receive your report during this period.
  • 31 to 90 days delay in paying EMIS – This is the actual period when the credit information companies will receive your credit default report from the lender. Your CIBIL score will now come down.
  • Over 90 days delay in paying EMIs – Your CIBIL score will crash. This is also the time when the company puts you in the list of defaulters, and proceeds with legal action.

If you have taken a zero-collateral loan such as a personal loan, non-payment of EMIs will have a greater impact on your CIBIL score. In the case of loans taken against collaterals such as house or property, the lender can initiate proceedings to seize the pledged assets. For housing loans, non-payment of EMIs for consecutive six months can result in the lender seizing the house, and later auctioning it.

How much impact does non-payment of EMIs make on my CIBIL score?

Out of a total of 100 basis points, credit rating agencies accord 35% to your credit history. The remaining includes 30% for the amount of the loan, 15% for the loan tenure, 10% for credit mix and another 10% for the recent loans – both amount and total number – availed. To put it simply, your credit history is the largest component for calculating your CIBIL score, and non-payment would drastically reduce your score.

How to check my CIBIL score?

If you are grappling with the question: how to check my CIBIL score, then fret not because you can do it in a few simple steps, online on the CIBIL website. Just log in to their website, and fill the requisite details. An OTP will then be sent to your registered mobile number/email address. Once the verification is complete, you will get access to your CIBIL score.

Thus, not paying your EMIs after completion of the moratorium period will cause your CIBIL score to fall. You must ensure to pay your EMIs on the scheduled dates, after August 31. If you are constantly worrying about how to check your CIBIL score, you can now choose to get access to  your CIBIL score .

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