A home loan is nothing but a long-term financial commitment. Life is not a bed of roses. Hard times can be at the door at any moment. One needs to be prepared for combat with all such situations which can be nerve-testing such as- a sudden job loss, loss in business, temporary outflow for prolonged disease etc. Being in home loan repayment tenure, all these temporary issues can be wisely handled albeit.
Bank will instantly label you as a defaulter with a single skip in EMI repayment. Of late, the government of India fortified the laws governing non-performing assets (NPAs), by giving more power to the financial institutions, to recover the NPAs. As a result, defaulting on EMIs will be observed more rigorously from the time forth.
What happens if you default on home loan EMI?
Based on a healthy credit score banks will sanction your home loan approval. Failing EMI repayment can hit the credit score. It will get in the way of future loan application. Banks generally wait for two EMIs to be missed. Banks are more interested in recovering the fund rather than getting into legal proceedings or property auctioning. As a last resort, a legal notice will be sent to the borrower and the loan will be classified as a Non-performing Asset (NPA). If the borrower unable to pay, then, the authorized officer will ask for the physical possession of the mortgaged property, by serving a demand possession notice to the borrower.
Ways to manage home loan EMIs during financial distress
“Cheap home loans shouldn’t be the only factor for borrowing a cumbersome loan amount. Before borrowing home loan it’s wise to have an assessment of your capacity of repayment counting your monthly expenses and also securing enough savings for unforeseen happenings. A proper assessment can actually safeguard you from an extreme financial crisis,”- suggested Mr. Mahesh Somani, Chairman- National RERA Committee, National Association of Realtors India (NAR-INDIA).
Here are immediate pointers on how one can manage their EMIs under financial stiffness-
• Inform the bank about your situation– When in an unfavourable situation,inform the financial institution about your issues. Considering your situation most lenders would try to help you out than to take any strict action.
• Consult financial advisors or credit bureaus for help– If you find that the situation is anyhow not favourable for repayment, you can always take assistance from financial advisors or credit bureaus for further guidance. They will definitely help you in maintaining a good credit score.
• Quick repayment– Quick repayment of the principal amount shortens the tenure as well as reduces the interest burden of the borrower. A double EMI repayment is permissible on annual basis.
• Careful spending– Apart from credit obligations, there should be a certain upper cap on your monthly spending. Have some savings for emergency situations.
• Home loan insurance– Taking an insurance against home loan reduces borrower’s obligations towards the loan repayment. It can even help you to pay up to 3 interests in case of job loss.
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