What Happens if My Personal Loan Becomes an NPA?

What Happens if Personal Loan Becomes NPA image By Bravima Solution Team

Personal loans are one of the most popular credit products in India. They are unsecured loans offered by banks and NBFCs to salaried and self-employed individuals without requiring collateral. While these loans provide instant access to funds, they also come with a responsibility — regular EMI payments.

But what happens if you fail to pay your EMIs for a few months? Your personal loan account can slip into a risky category known as NPA (Non-Performing Asset).

In this blog, Bravima Solution Pvt Ltd — a trusted loan aggregator helping borrowers with NBFC-backed loans and overdraft facilities — explains:

What NPA means in personal loans
The consequences of your loan turning into an NPA
Its impact on your CIBIL score and future borrowing
Solutions and alternatives available to borrowers

What is NPA in Personal Loans?

In simple terms, an NPA (Non-Performing Asset) is a loan account where the borrower has not paid EMIs for more than 90 days.

– According to the RBI guidelines:

If an EMI is overdue for more than 90 days, the loan is classified as NPA.
Until the 90th day, the account is marked as SMA (Special Mention Account).
SMA Categories:
- SMA-0: Delay up to 30 days
- SMA-1: Delay between 31–60 days
- SMA-2: Delay between 61–90 days

If payment is still not made, the account becomes an NPA on the 91st day.

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What Happens if Your Personal Loan Becomes an NPA?

If your personal loan becomes an NPA, several negative consequences follow:

1. Your CIBIL Score Drops Significantly

Defaulting on EMIs and turning into an NPA can reduce your CIBIL score by 100–150 points or more.
This makes it extremely difficult to get fresh loans, credit cards, or even a top-up facility in the future.

2. You Lose Loan Eligibility

Banks and NBFCs consider NPA borrowers as high-risk customers.
Future applications for loans (personal loan, home loan, business loan, car loan) are often rejected instantly.

3. Banks/NBFCs Start Recovery Action

You will receive repeated reminder calls and notices.
Collection agents may visit your home or office.
If dues are not cleared, the lender may file a civil recovery suit.

4. Possible Legal Action

Under the SARFAESI Act, 2002, secured loans can lead to asset seizure.
For unsecured loans like personal loans, lenders can take civil legal action for recovery.

5. Financial Stress & Mental Pressure

Continuous calls from recovery teams, stress of legal notices, and being denied credit in the future can create mental and financial strain.

Impact of NPA on Borrowers

The effect of a personal loan becoming NPA varies based on the borrower type:

Borrower Type	Impact of NPA
Salaried Employees	Salary deductions, negative CIBIL, denial of credit cards, and difficulty in future loans.
Self-Employed/Business Owners	Business credit crunch, denial of working capital, risk of business slowdown.
Students/Young Borrowers	Damaged financial reputation early in career, limited future loan eligibility.

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How Banks/NBFCs Handle NPA Personal Loans

Once your account turns into an NPA, lenders usually follow this process:

Reminder Calls & Emails – Requesting payment.
Official Notices – Demand notice is sent under RBI rules.
Restructuring Option – In some cases, EMI rescheduling is offered.
One-Time Settlement (OTS) – A lump sum settlement amount is negotiated.
Legal Recovery – Civil suit for unsecured loans.

How to Avoid Your Personal Loan Becoming an NPA

Here are some smart tips to prevent your loan from slipping into NPA status:

Pay EMIs on Time – Always keep track of due dates.
Set Auto-Debit Facility – Helps avoid missed payments.
Use Overdraft Loan Instead of Defaulting – With an overdraft facility (offered by NBFCs like Bajaj Finserv, HDFC, etc.), you pay interest only on what you use. Bravima Solution Pvt Ltd helps borrowers secure such loans.
Communicate with Lender – If you face financial trouble, request restructuring.
Avoid Multiple Loans – Taking too many loans increases risk of default.

How Bravima Solution Pvt Ltd Can Help Borrowers

At Bravima Solution Pvt Ltd, we understand that financial emergencies can lead to missed EMIs. Our role as a loan aggregator with strong NBFC partnerships helps borrowers:

Explore overdraft loan options as an alternative to personal loan defaults.
Connect with NBFCs offering restructuring and flexible repayment plans.
Compare loans across multiple lenders to find the lowest interest rates.
Get expert consultation to improve CIBIL scores and avoid future NPAs.

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Case Study: NPA to Recovery with Bravima Solution

Example:
A salaried employee in Delhi defaulted on his personal loan EMIs for 4 months due to medical expenses. His account was declared NPA, and his CIBIL score dropped to 580.

He approached Bravima Solution Pvt Ltd, where our team:

Helped him negotiate a restructuring plan with the NBFC.
Guided him towards an overdraft loan facility for future emergencies.
Advised him on improving his CIBIL score.

Within 6 months, his loan account was regularized, and he regained financial stability.

FAQs

Q1. What happens if I don’t pay personal loan EMIs for 3 months?
– Your account is tagged as NPA after 90 days of default.

Q2. Can I get a loan after becoming an NPA borrower?
– Yes, but only after settlement or restructuring and improving your CIBIL score.

Q3. Does NPA affect my CIBIL score?
– Yes, it reduces your score significantly and stays on record for years.

Q4. Is NPA a criminal case?
– No, personal loan default is a civil issue, but lenders can take legal recovery action.

Q5. How can Bravima Solution help me if my loan becomes NPA?
– By connecting you with NBFCs for restructuring, providing overdraft loan alternatives, and guiding you in credit repair.