Missed Home Loan EMI Payment?

Home loan EMI is a significant payment that must be made on time. Despite your best efforts, you may fail to make your home loan EMI payment owing to unforeseen situations such as job loss or a medical emergency. Are you aware of the consequences? Read further to learn everything about it.

Home loan equated monthly installments (EMIs) are a considerable percentage of many buyers’ regular expenses. So, what happens if you find yourself in a situation where you cannot fulfill your EMIs on a consistent basis? This could be due to a family emergency or a job loss, among other things.

It’s critical that you don’t bury your head in the sand. If you fail to make your EMI payments, the interest will be applied to your total outstanding sum. This indicates that your loan will most likely become more expensive in the long run.

What happens if you miss your Home Loan EMI due date(s)?

A missing home loan EMI(s) has distinct implications, which vary according to your existing circumstances. However, you will certainly experience the following consequences:

Detrimental Effect on Your Credit Score

The Credit Score is a credit rating statistic that lenders use when lending money to borrowers. As you may be aware, your Credit Score reflects your financial stability and credit history. When you skip an EMI or do not clear your bills on time, your credit score suffers. With each missed EMI, the score may decline by 50 to 70 points.

A Lack of Creditworthiness

With effective credit management, your Credit Score can rise after a set period of time. When you skip a Home Loan EMI, the lenders leave remarks or evaluations on your credit report. Even if you have a high Credit Score, these unfavorable comments can hurt your prospects of getting a loan in the future.

Reduced Likelihood of a Home Loan Balance Transfer

If you skip your EMI payments 2 to 3 times, it would be difficult to obtain a home loan balance transfer. This means you will miss out on the opportunity to refinance your loan at a reduced interest rate. After falling behind on your payments, you will be classified as high risk. This is why other banks and finance businesses may be hesitant to accept your home loan balance transfer loan.

Borrow with Caution

Because of the aforementioned impact, it is critical to ensure that you are capable of repaying the loan amount borrowed. Make sure your EMI payments are less than 45 percent of your income so that you are better equipped to make monthly payments during the life of your loan. Because a home loan is a 15-30 year commitment, it is critical to feeling comfortable while making your monthly payments.

The possibility of being labeled as an NPA

If you do not settle your dues within 90 days of your last payment, your lending institution classifies your loan as a Non-Performing Asset (NPA) and sends you a legal notice. If you do not pay at this point, your lender will notify you that your property will be auctioned to recoup unpaid debts.

Also Read: Home Loan EMI Calculator: How to Reduce Your Home Loan EMI Burden

What Should You Do if Your Home Loan EMI is Late?

It’s critical that you don’t bury your head in the sand. If you fail to make your EMI payments, the interest will be applied to your total outstanding sum. This indicates that your loan will most likely become more expensive in the long run.

Rule Number One is to Not Panic.

You have several options for getting back on track. It is critical that you do not disregard the problem because doing so would simply worsen matters. If you fail to make a payment, your bank will contact you right away.

Rule Number Two is to Contact Your Bank.

If you are unable to pay your EMIs on time, notify your bank as soon as you are aware that you will be unable to fulfill the repayment plan. If you are serious about paying your bills and have a strong track record of repayment, the bank will be ready to give you some tolerance.

Banks frequently interact with the borrower to determine the cause of the payment delinquency. The bank will assist if the difficulty is legitimate and the borrower will begin paying the EMI shortly.

Rule Three is to Seek Professional Help.

Some financial counseling services are also available. These facilities typically offer free services. They help by analyzing their condition, counseling them, and offering options.

Counseling services can assist you in creating a budget so that you can figure out how to make your loan payments. They advise you on how to approach your lender regarding your repayments and the many options available to you.

Rule Four is to Create a Budget.

If you want to skip rule number three, examine your money and create a budget that you can stick to. Even if you are not having difficulty meeting your loan repayments, this practice will help you acquire control over your money.

Begin by reviewing your financial accounts and calculating all of your expenses and income streams. This will assist you in identifying areas where you can cut back on expenditure, freeing up income to meet your EMI commitments. If you are about to lose your home, avoid luxury until your finances are back in order.

Examine your insurance coverage to see if it covers job loss. Some insurers provide insurance that covers your Home Loan EMIs for three months after you lose your job. However, the employment loss must be due to a layoff or illness. The policy excludes termination for unsatisfactory performance.

Can the bank seize your house?

If a borrower misses one or two EMIs, the bank will not take possession of the property right away. After three defaults, the bank normally sends a notification to the borrower, requesting that he pay his debts as quickly as possible.

If the default lasts six months, banks grant the borrower a two-month grace period to resume repayment. Failure to do so will result in the loan being declared a non-performing asset by the bank (NPA). It can now sell the property to recoup its losses.

What exactly does the law say?

When borrowers fail to repay their loans, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) authorizes banks and financial institutions to auction off residential and commercial properties. It enables banks to lower their NPAs by implementing recovery measures.