Taking an education loan provides significant financial aid for your academic journey. It requires timely repayments within the education loan repayment time through EMIs that include both principal and interest. If a payment is missed, it becomes an ‘overdue amount in education loan’, adding financial stress.
The good news is that some lenders may allow you to make up for missed payments without extra penalties, as long as you act quickly. In this blog, we’ll break down what overdue amounts are, their consequences, and how to effectively manage them to avoid financial strain.
Table of contents
- What is Overdue Amount in Education Loan?
- What is the Difference Between ‘Due’ and ‘Overdue Amount’ in Education Loan?
- How is the Overdue Amount on an Education Loan Calculated?
- What Happens if You Don’t Pay an Overdue Amount?
- How to Avoid Overdue Amounts on Education Loans?
- Can You Clear an Overdue Education Loan Without Penalties?
- FAQs
What is Overdue Amount in Education Loan?
An overdue amount in an education loan refers to any repayment that hasn’t been made by the due date. This could involve either the principal or the interest portion of your loan or both.
If you forget to make a payment or delay it, your loan balance increases and you might also face extra charges. Not to mention, your credit score can take a hit, which might affect your future financial plans.
It’s essential to stay on track with repayments, even during the moratorium period, to avoid these issues.
Also Read: Check all about Days Past Due in CIBIL Report. Know the meaning, DPD full form, calculation method and DPD values here in detail.
What is the Difference Between ‘Due’ and ‘Overdue Amount’ in Education Loan?
When it comes to education loans, it’s important to distinguish between the “due” and “overdue” amounts, as they reflect different stages of payment. The due amount refers to the payment you need to make by the agreed-upon due date, while the overdue amount is the amount left unpaid after the due date, which typically incurs additional charges.
| Criteria | Due Amount | Overdue Amount |
| Definition | The scheduled payment is to be made on the due date. | The payment remains unpaid after the due date. |
| Timing | Paid on or before the due date. | Missed payment after the due date. |
| Penalty | No penalty if paid on time. | Interest and late fees may be applied. |
| Effect on Credit Score | No impact if paid on time. | Can negatively affect credit score if not paid soon. |
| Possible Action | No further action if paid on time. | This may lead to collection notices or legal action if not cleared. |
| Additional Costs | No extra cost if paid by the due date. | Extra interest and possible fees for non-payment. |
How is the Overdue Amount on an Education Loan Calculated?
The overdue amount in an education loan is calculated based on the unpaid principal and interest after the due date. When a payment is missed, interest starts accumulating on the outstanding balance, increasing the loan liability.
Lenders also impose late fees, which are either a fixed percentage or a specific amount, depending on the bank’s terms. The longer the overdue amount remains unpaid, the more it accrues, further complicating your financial obligations.
To understand how an overdue amount is calculated, let’s use an example:
Example: Suppose you have an education loan of INR 5,00,000 with an interest rate of 10% per annum. Your EMI is INR 5,500, due on the 1st of every month. You missed a payment, and your loan remains overdue by 15 days.
The overdue amount will include:
- Unpaid EMI of INR 5,500.
- Interest on the missed EMI (INR 5,500 x 10% / 12 months = INR 45.83 for 15 days).
- Late fee (assume INR 200 as per your bank’s terms).
So, your overdue amount would be INR 5,500 + INR 45.83 + INR 200 = INR 5,745.83 for the missed EMI.
The calculation becomes more complex if the overdue period is longer, as interest and penalties keep increasing with time.
What Happens if You Don’t Pay an Overdue Amount?
The consequences of leaving an overdue amount unattended can be serious. If you let overdue amounts in education loans accumulate, here’s what you could be up against:
- Extra Interest: The overdue amount will start accumulating interest, which can increase your overall loan liability. You could end up paying more than you originally borrowed.
- Late Fees: Banks and financial institutions typically charge late fees for overdue payments. These fees could be a fixed percentage or a set amount, depending on your bank’s terms.
- Impact on Credit Score: If you consistently miss payments, your credit score takes a dip. A lower credit score means future loans will come with higher interest rates, making them more expensive in the long run.
- Collection Agencies and Legal Action: If overdue amounts remain unresolved for too long, the lender may hand over your loan to collection agencies or even initiate legal action.
Also Read: Have overdue payments by 30 days or more, check out this blog on how to fix delinquency on credit reports. Know to steps and important tips to prevent future delinquencies.
How to Avoid Overdue Amounts on Education Loans?
The good news is, that you don’t have to stress about overdue amounts if you stay on top of your loan repayments. Here are a few practical tips to keep your finances in check:
- Automate Payments: Set up automatic deductions from your bank account for loan repayments using NACH (National Automated Clearing House) or ECS (Electric Clearance Service) modes of repayment. This removes the possibility of forgetting or missing a payment.
- Stay Ahead of Your Repayments: Keep track of your loan’s repayment schedule and make payments before the due date. Planning can help avoid penalties.
- Negotiate Your Loan Terms: If you’re having trouble making payments, talk to your lender. Many banks offer options for education loan restructuring to ease the burden during financial hardship.
- Understand the Terms: Make sure you fully understand the repayment terms and interest structure of your loan. Knowing the exact due dates and how interest accumulates will help you avoid unexpected charges.
Can You Clear an Overdue Education Loan Without Penalties?
If you’ve missed a payment and the loan has become overdue, you can still act quickly to reduce the damage. But only under specific circumstances, it is possible to clear an overdue education loan without penalties.
Some lenders offer a grace period or allow you to clear the overdue amount without charging extra fees if you make the payment within a certain window. However, this depends on the lender’s policies.
If you catch up quickly and communicate with your bank, you may avoid additional penalties or interest charges. It’s essential to stay proactive and reach out to your lender for options to manage the overdue amount.
This was all about overdue amounts in education loans. To learn more about education loans, the best bank accounts for students, forex, banking experience for global students, or international money transfers, reach out to our experts at 1800572126 to help ease your experience with studying abroad.
FAQs
Yes, repaying overdue EMI will gradually improve your CIBIL score, but it may take time to fully recover from the negative impact of missed payments.
If you miss payments, penalties and interest will accumulate. Continued non-payment can lead to a damaged credit score, collection agencies, or legal action.
Not repaying education loans can lead to a lower credit score, higher interest rates on future loans, and legal consequences, including asset seizure.
Failing to repay student loans results in accrued interest, late fees, and a reduced credit score, which can affect your ability to get credit in the future.
Overdue amounts are calculated by adding the missed EMI, accrued interest, and any penalties, based on your lender’s terms and overdue duration.
Some lenders allow clearing overdue amounts without penalties if you act quickly. However, late fees may still apply depending on the delay.
Yes, overdue amounts negatively affect your CIBIL score. A lower score can make it harder to obtain loans or credit cards in the future.
Lenders typically initiate legal action after 3-6 months of missed payments. However, it depends on the bank and the loan terms.
Yes, you can often negotiate with your lender to pay overdue amounts in instalments, but this depends on their policy.
Contact your lender immediately to discuss possible solutions like restructuring your loan or opting for a settlement plan to reduce the burden.
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