How to Clear Overdue Payments with a Personal Loan?

Falling behind on financial obligations can happen due to unexpected life events like medical emergencies or temporary job shifts. However, letting overdue payments linger can lead to a cycle of late fees, penalty interest rates, and a declining CIBIL score.

A Personal Loan for Debt Consolidation at Hero FinCorp acts as a financial "reset button." It allows you to merge various high-interest debts like credit card bills or retail loans into a single, structured monthly payment. This not only simplifies your life but often reduces the total interest you pay.

What is the Overdue Amount in Loan?

In professional lending terms, any total sum that remains unpaid after the scheduled due date is what is the overdue amount in loan. In Hindi, this is commonly referred to as ‘atidey raashi’. Modern digital lending has made credit accessible; however, the responsibility of timely repayment remains paramount to avoid the "Default" tag.

Once the borrower misses the deadline, the lender starts charging penal charges. As per the RBI Master Direction on Fair Practices Code for Penal Charges in Loan Accounts, penal interest cannot be capitalized, and lenders must levy "penal charges" rather than "penal interest" to ensure borrower transparency. If the debtor does not make the payments for a long time, the outstanding amount gets bigger due to the accumulation of these charges. The overdue in loan concept remains the same for all credit facilities.

Clear Overdue Payments with Personal Loans: Step By Step Process

1. Assess Your Financial Situation

The first step is a "Financial Health Check." List every outstanding debt you currently hold. For example:

• Credit Card A: ₹40,000 (36% Interest)
• Retail Loan B: ₹25,000 (18% Interest)
• Personal Loan C: ₹35,000 (14% Interest)

Total Debt: ₹1,00,000. By consolidating these into a single Hero FinCorp loan at a potentially lower interest rate (e.g., 12-15%), you stop the high-interest leakage from your credit cards. Use a Loan Overdue Calculator on the lender’s website to determine the exact "Payoff Amount" including any accrued penalties.

2. Research and Choose the Right Lender

Not all loans are created equal. When researching, look for a regulated NBFC that offers:

• Transparent Risk-Based Pricing: Rates that reward your current income stability.
• Flexible Tenures: Options to spread the loan over 12 to 60 months to fit your monthly budget.
• Minimal Hidden Fees: Always check the Key Fact Statement (KFS) as per RBI mandates.

3. Apply and Secure Approval

Hero FinCorp offers a seamless digital application process. To speed up your approval for a consolidation loan, keep the following ready:

• KYC Documents: Aadhaar and PAN.
• Income Proof: Last 6 months of bank statements showing regular salary credits.
• Employment Details: To verify stability.

Once approved, review the Annual Percentage Rate (APR). This reflects the true cost of the loan, including processing fees, helping you ensure that the consolidation actually saves you money.

4. Execute the Consolidation

Once the loan amount is disbursed, act immediately:

• Clear the High-Interest Debt First: Pay off the accounts with the highest interest rates (usually credit cards).
• Request Closing Certificates: Ensure you get a "No Objection Certificate" (NOC) or a "Settled/Paid in Full" receipt from each creditor.
• Monitor Your Report: Within 30–45 days, your credit report should update these overdue accounts to "Closed" or "Paid," which will begin the process of repairing your credit score.

5. Foster New Financial Habits

Consolidating your debt is only half the battle; staying debt-free is the goal.

• Automate Your EMI: Set up an e-NACH or ACH mandate so your Hero FinCorp EMI is deducted automatically on your payday.
• Build an Emergency Fund: Aim to save 3 months of expenses so you don't have to rely on credit for future surprises.
• Avoid New Credit: Refrain from taking new loans or using credit cards until your consolidation loan is significantly paid down.

Benefits of Making Overdue Payment Using a Personal Loan

Those who meet the eligibility criteria of a regulated NBFC and maintain a stable income can acquire a Personal Loan swiftly. Personal Loans simplify the resolution of an overdue loan in several ways:

• Tailored Loan Amount: The borrower can seek a loan amount precise to their total overdue loan balance.
• No End-Use Restrictions: This allows borrowers to allocate funds to repay their outstanding loans immediately.
• Digital Efficiency: Leading regulated NBFCs like Hero FinCorp offer instant approval and fast disbursal, enabling users to address an overdue payment before it hits the next 30-day bureau reporting cycle.

Clearing the past overdue amount in loan with a Personal Loan is a safer option than letting it compound and further damaging your credit report. Consider a personal loan for debt consolidation from a regulated NBFC to resolve your financial condition at the earliest.

Conclusion

Managing an overdue amount in loan requires a proactive rather than a reactive approach. While the stress of an overdue loan can be overwhelming, leveraging a Personal Loan for debt consolidation offers a structured pathway to recovery. By converting high-interest, fragmented debts into a single, transparent monthly installment with a regulated NBFC, you protect your long-term creditworthiness and halt the cycle of penal charges. However, remember that a loan is a commitment; ensure your choice aligns with your current repayment capacity to maintain a healthy, default-free financial future.

Frequently Asked Questions (FAQs)

What Is The Difference Between An Overdue Amount And A Default?

An overdue amount in loan refers to any payment missed after the due date. A "default" typically occurs when the overdue payment remains unpaid for an extended period (usually 90 days), leading the account to be classified as a Non-Performing Asset (NPA) as per RBI income recognition norms.

Can I Get A Personal Loan With Overdue In CIBIL?

Securing a personal loan with overdue in CIBIL is challenging but possible. While top-tier lenders prefer a score of 750+, some regulated NBFCs may consider applications if the borrower can prove a stable income and a valid reason for past delays. However, expect higher interest rates to compensate for the perceived risk.

How Much Penal Charge Can A Lender Levy On An Overdue Loan Payment?

As of the RBI guidelines, lenders must ensure that penal charges are "reasonable" and commensurate with the overdue loan amount. These charges cannot be capitalized (added to the principal to charge further interest) and must be clearly defined in the Key Fact Statement (KFS) provided at the time of loan sanction.

Will Clearing My Overdue Loan Immediately Increase My Credit Score?

Paying off the overdue amount in loan will stop further damage to your score. However, your credit history will still reflect the past delay. It usually takes 3 to 6 months of consistent, on-time repayments following a settlement to see a significant positive trend in your CIBIL report.

Is It Wise To Take A New Loan To Pay Off An Overdue Loan?

This strategy, known as debt consolidation, is wise only if the new Personal Loan offers a lower interest rate or a more manageable repayment tenure than the existing overdue payment. It is a tool to streamline debt, not a way to erase it; ensure you have a fixed budget to honor the new EMIs.

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