diff --git a/dvc/dependency/param.py b/dvc/dependency/param.py
index 311e8a82a2..f35a7e0b57 100644
--- a/dvc/dependency/param.py
+++ b/dvc/dependency/param.py
@@ -1,3 +1,4 @@
+import errno
 import logging
 import os
 from collections import defaultdict
@@ -18,6 +19,14 @@ class MissingParamsError(DvcException):
     pass
 
 
+class MissingParamsFile(DvcException):
+    pass
+
+
+class ParamsIsADirectoryError(DvcException):
+    pass
+
+
 class BadParamFileError(DvcException):
     pass
 
@@ -27,9 +36,9 @@ class ParamsDependency(Dependency):
     PARAM_SCHEMA = {PARAM_PARAMS: Any(dict, list, None)}
     DEFAULT_PARAMS_FILE = "params.yaml"
 
-    def __init__(self, stage, path, params):
+    def __init__(self, stage, path, params=None, repo=None):
         info = {}
-        self.params = []
+        self.params = params or []
         if params:
             if isinstance(params, list):
                 self.params = params
@@ -43,6 +52,7 @@ def __init__(self, stage, path, params):
             path
             or os.path.join(stage.repo.root_dir, self.DEFAULT_PARAMS_FILE),
             info=info,
+            repo=repo,
         )
 
     def dumpd(self):
@@ -88,12 +98,31 @@ def workspace_status(self):
     def status(self):
         return self.workspace_status()
 
-    def _read(self):
+    def validate_filepath(self):
         if not self.exists:
-            return {}
+            raise FileNotFoundError(
+                errno.ENOENT, os.strerror(errno.ENOENT), str(self)
+            )
+        if self.isdir():
+            raise IsADirectoryError(
+                errno.EISDIR, os.strerror(errno.EISDIR), str(self)
+            )
+
+    def read_file(self):
+        _, ext = os.path.splitext(self.fs_path)
+        loader = LOADERS[ext]
+
+        try:
+            self.validate_filepath()
+        except FileNotFoundError as exc:
+            raise MissingParamsFile(
+                f"Parameters file '{self}' does not exist"
+            ) from exc
+        except IsADirectoryError as exc:
+            raise ParamsIsADirectoryError(
+                f"'{self}' is a directory, expected a parameters file"
+            ) from exc
 
-        suffix = self.repo.fs.path.suffix(self.fs_path).lower()
-        loader = LOADERS[suffix]
         try:
             return loader(self.fs_path, fs=self.repo.fs)
         except ParseError as exc:
@@ -101,6 +130,12 @@ def _read(self):
                 f"Unable to read parameters from '{self}'"
             ) from exc
 
+    def _read(self):
+        try:
+            return self.read_file()
+        except MissingParamsFile:
+            return {}
+
     def read_params_d(self, **kwargs):
         config = self._read()
 
diff --git a/dvc/output.py b/dvc/output.py
index bc3c0964c8..87bd4fa477 100644
--- a/dvc/output.py
+++ b/dvc/output.py
@@ -291,9 +291,9 @@ def __init__(
         desc=None,
         isexec=False,
         remote=None,
+        repo=None,
     ):
-        self.repo = stage.repo if stage else None
-
+        self.repo = stage.repo if not repo and stage else repo
         fs_cls, fs_config, fs_path = get_cloud_fs(self.repo, url=path)
         self.fs = fs_cls(**fs_config)
 
diff --git a/dvc/repo/experiments/init.py b/dvc/repo/experiments/init.py
index 613906b1ae..f347ba345a 100644
--- a/dvc/repo/experiments/init.py
+++ b/dvc/repo/experiments/init.py
@@ -8,7 +8,6 @@
     Callable,
     Dict,
     Iterable,
-    List,
     Optional,
     TextIO,
     Tuple,
@@ -168,26 +167,29 @@ def _check_stage_exists(
         )
 
 
-def loadd_params(path: str) -> Dict[str, List[str]]:
-    from dvc.utils.serialize import LOADERS
-
-    _, ext = os.path.splitext(path)
-    return {path: list(LOADERS[ext](path))}
-
-
-def validate_prompts(key: str, value: str) -> Union[Any, Tuple[Any, str]]:
+def validate_prompts(
+    repo: "Repo", key: str, value: str
+) -> Union[Any, Tuple[Any, str]]:
     from dvc.ui.prompt import InvalidResponse
 
     if key == "params":
+        import errno
+
+        from dvc.dependency.param import ParamsDependency
+
         assert isinstance(value, str)
         msg_format = (
             "[prompt.invalid]'{0}' {1}. "
             "Please retry with an existing parameters file."
         )
-        if not os.path.exists(value):
-            raise InvalidResponse(msg_format.format(value, "does not exist"))
-        if os.path.isdir(value):
-            raise InvalidResponse(msg_format.format(value, "is a directory"))
+        try:
+            ParamsDependency(None, value, repo=repo).validate_filepath()
+        except (IsADirectoryError, FileNotFoundError) as e:
+            suffices = {
+                errno.EISDIR: "is a directory",
+                errno.ENOENT: "does not exist",
+            }
+            raise InvalidResponse(msg_format.format(value, suffices[e.errno]))
     elif key in ("code", "data"):
         if not os.path.exists(value):
             return value, (
@@ -220,7 +222,7 @@ def init(
     if interactive:
         defaults = init_interactive(
             name,
-            validator=validate_prompts,
+            validator=partial(validate_prompts, repo),
             defaults=defaults,
             live=with_live,
             provided=overrides,
@@ -242,7 +244,17 @@ def init(
     params_kv = []
     params = context.get("params")
     if params:
-        params_kv.append(loadd_params(params))
+        from dvc.dependency.param import (
+            MissingParamsFile,
+            ParamsDependency,
+            ParamsIsADirectoryError,
+        )
+
+        try:
+            params_d = ParamsDependency(None, params, repo=repo).read_file()
+        except (MissingParamsFile, ParamsIsADirectoryError) as exc:
+            raise DvcException(f"{exc}.")  # swallow cause for display
+        params_kv.append({params: list(params_d.keys())})
 
     checkpoint_out = bool(context.get("live"))
     models = context.get("models")