Losing a job can have serious financial consequences, putting immediate pressure on household finances and day-to-day spending. This pressure intensifies when borrowers must continue to meet fixed monthly commitments such as car or personal loan EMIs.
Furthermore, it is a given that on a pending loan repayment can adversely affect your overall credit profile and credit score. Experts advise borrowers not to wait for a loan default before taking action.
This calls for taking meaningful steps, such as analysing available savings, checking insurance coverage, and directly reaching out to lenders early, to manage the situation amicably and seek a resolution, such as a loan modification or restructuring, to avoid default and legal complications.
Keeping these core aspects in mind, let us discuss what a is, current car loan rates, and expert views on how to handle such a situation strategically.
What is a car loan and what are the current interest rates?
To put it simply, a car loan is a secured loan that helps individuals finance the purchase of a new or used car, with the vehicle generally serving as security for the loan. According to recent Paisabazaar data, car loan interest rates across major banks and NBFCs range from 7.35% to 14.05% per annum.
Furthermore, the final car loan interest rate eventually depends on factors such as the lender, , loan amount and borrower profile. For a ₹5 lakh loan over five years, the EMI can broadly range from about ₹9,983 to ₹11,647.
Lost your job? Don’t wait until you miss an EMI
A job loss or a difficult financial situation will not automatically translate into a borrower defaulting on their car loan. When faced with such a situation, it is wise to stay calm and focus on fundamentals.
The first step is to check how long the available resources can sustain essential expenses. Then approach the lenders accordingly, before missing the Open communication and prompt action are critical here.
Amit Setia, Chief Business Officer, Car Loans, Capri Loans, explained this aspect in detail. “Job loss can be a temporary financial setback, and taking early action can help borrowers manage it effectively. The first step should be to assess available resources and proactively speak with the lender before an EMI is missed.
Depending on the lender’s policies, temporary relief or restructuring may be explored. Supporting documents such as termination letters, or proof of income disruption may be required, while savings or eligible insurance can provide additional support,” Setia said.
Adhil Shetty, CEO, BankBazaar, echoed similar views. “Borrowers must proactively approach their lenders immediately after a job loss and well before the first missed EMI payment. Lenders are often highly supportive and can offer critical temporary relief options, including customised , tenure extensions, or short moratoriums. To qualify, you must present formal financial proof, such as your official termination letter and recent bank statements,” Shetty noted. According to him, acting early actively safeguards one’s credit health and preserves future borrowing capacity.
Can you use savings or insurance to manage the EMI?
An emergency fund can serve as a lifeline when an individual faces a temporary loss of income. Still, borrowers should balance their with essential household expenses and avoid exhausting their entire liquid savings to meet EMIs only.
On this, Setia said, “An emergency fund is designed precisely to provide support during unforeseen situations, so using a portion of it to maintain EMIs can be a prudent approach. Borrowers should ideally plan for three to six months of EMIs while preserving enough savings for essential expenses and future contingencies. If loan protection or credit insurance has been purchased, borrowers should also check whether it offers coverage for job loss or income disruption.”
Shetty expressed similar views, highlighting the importance of emergency funds and sensible financial management. He opined, “Using an to continue EMIs makes immense sense because it prevents immediate default. Ideally, borrowers should prioritise reserving three to six months of EMIs from available savings, while carefully avoiding completely exhausting their entire liquid corpus to cover other daily essentials. Additionally, check if you already have loan protection or credit insurance, as these policies often provide vital temporary assistance by covering your EMIs during sudden job loss.”
Act before the EMI becomes a problem
Therefore, for a borrower facing a job loss or a temporary blip in income, the key is to stay vigilant and act before leads to a car loan EMI default. To address this situation, they should approach the lender, review available savings, check whether insurance provides any support, and prioritise essential expenses.
Taking these steps before missing the first EMI can protect immediate financial stability and long-term .
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Readers should consult a qualified financial professional or lender for advice based on their individual circumstances.