Published on January 06, 2026 | By LoanPao Team
Job loss is stressful, and ongoing personal loan EMIs can make it worse. Missing payments leads to penalties, collection calls and CIBIL damage. The good news? Banks offer solutions like moratorium, restructuring and settlement. This guide gives you a clear action plan to handle personal loan EMIs during unemployment in India 2026.
Immediate Actions (First 7 Days After Job Loss)
- Assess Your Finances: List all EMIs, savings, severance pay, investments.
- Create Emergency Budget: Cut non-essential spending to minimum.
- Inform Family: Discuss and plan together.
- Contact Lender Immediately: Call customer care – early communication shows good faith.
Step-by-Step Smart Repayment Plan
1. Use Emergency Fund / Savings
Cover 3-6 months EMIs from savings. Keep at least 6 months living expenses aside.
2. Check for Loan Protection Insurance
Many personal loans come with bundled credit shield insurance that covers EMIs in case of job loss (usually 3-6 months). Check your loan agreement or call bank.
3. Request EMI Moratorium
Banks may offer 3-6 months deferment (interest accrues). RBI allows hardship provisions – apply formally with job loss proof.
4. Loan Restructuring
Convert to lower EMI by extending tenure (up to 2 years extra allowed). Interest rate may increase slightly.
5. Partial Prepayment from Severance/Gratuity
Reduce principal to lower future EMIs.
6. Alternative Income Sources
- Freelancing / gig work
- Part-time job
- Rent out assets
- Liquidate non-essential investments
7. Balance Transfer to Lower Rate
If CIBIL still good, transfer to bank offering lower rate + longer tenure.
8. Settlement as Last Resort
Negotiate one-time settlement (70-80% of outstanding). Impacts CIBIL severely – avoid if possible.
Documents Needed for Restructuring/Moratorium
| Document | Purpose |
|---|---|
| Termination Letter / Resignation Acceptance | Proof of job loss |
| Last 3 Salary Slips | Previous income proof |
| Bank Statements | Financial hardship evidence |
| ID & Address Proof | KYC update |
How Job Loss Affects CIBIL Score
- 30 days late: Minor drop
- 90+ days: Severe damage (100-200 points)
- Settlement: "Settled" tag for 7 years
Act early to avoid defaults!
Prevention Tips for Future
- Always buy loan insurance for job loss cover
- Build 6-12 months emergency fund
- Opt for loans with moratorium clause
- Keep CIBIL healthy