From EMIs to Easy Repayment: Common Loan Mistakes Indians Make — and How to Avoid Them

With increasing financial aspirations and easier access to credit, more Indians are turning to loans to fund everything from education and medical emergencies to home purchases. While taking a loan can be a smart financial move, the real challenge often lies in managing repayments. Missed EMIs, poor planning, and reactive decision-making can turn good credit into growing debt.

Here are five common mistakes borrowers make—and what you can do to stay financially healthy and repay your loans stress-free.

No Budget, No Plan: The EMI Trap

Jumping into loan repayment without mapping out your monthly income and expenses is a key reason borrowers run into trouble.

Kundan Shahi, founder of loan awareness platform Zavo, says,
“If you don’t budget properly, your EMIs could clash with essential expenses, causing delays and defaults.”

Solution:
Follow simple frameworks like the 50-30-20 rule—allocate 50% of income to essentials, 30% to lifestyle wants, and 20% to savings and debt repayments. Track your spending and ensure you always have enough set aside for timely EMI payments.

Skipping or Delaying EMI Payments

Even one missed EMI can affect your credit score, invite penalties, and make future borrowing costlier.

Solution:
Automate EMI payments through bank auto-debit or set calendar reminders. If you anticipate a delay, inform your lender immediately—they may offer options like rescheduling or deferral.

Borrowing to Repay Old Loans

Taking new loans or using credit cards to repay existing debt is a slippery slope that can trap you in a cycle of ever-increasing EMIs. An RBI survey noted that 27% of borrowers take new credit just to repay old dues.

Solution:
Only consider new credit if it genuinely reduces your total interest, like a debt consolidation loan at lower rates. Otherwise, focus on cutting non-essential expenses, increasing income, or seeking restructuring help from your current lender.

Not Exploring Ways to Lower Interest

Loan terms aren’t set in stone—many borrowers miss the chance to refinance or transfer balances to take advantage of lower interest rates.

“A 1% interest reduction on a ₹50 lakh loan can save you lakhs,” says Shahi.

Solution:
Annually review your loan conditions. If you have a solid repayment track record, explore balance transfers or loan refinancing. Check for processing fees or prepayment penalties, but weigh them against the long-term savings.

Staying Silent During Financial Trouble

Facing a temporary financial crunch? Avoiding your lender can make things worse, damage your credit, and close doors to helpful solutions.

Solution:
Proactively communicate. During the COVID-19 crisis, over 50 lakh Indians benefited from EMI moratoriums simply by asking. Lenders can offer deferments, tenure extensions, or restructuring options if they know your situation.

The Bottom Line

Borrowing isn’t the issue poor repayment strategy is. A well-planned, transparent, and proactive approach can help you stay on top of your debt, protect your credit score, and achieve your financial goals faster.

Think before you borrow but more importantly, think smarter while you repay.