A home loan whether through HFCs like Indiabulls home loan, LIC housing finance home loan or public sector banks like Bank of India, State Bank of India, Bank of Baroda, etc., permits you to fund your dream home with ease. However, owing to its huge size and high repayment tenure of up to thirty years, keeping up with the regular repayments may be very challenging. Despite planning out the loan repayments, you might miss out on your loan EMI dues owing to the unforeseen circumstances like medical exigency or job loss. In such cases, there are consequences for delaying the EMI repayments. However, there are even ways you can avoid them. To know, read on.
What happens when you miss out on home loan EMI dues?
Missing out on home loan EMIs results in consequences, the specifics may differ based on your present scenario. However, whatever the situation is, you require facing the repercussions.
Reduction in your credit score –
Many Indian lending institutions report your behaviour towards loan or other credit options’ repayment to the credit bureau. Missing even one EMI repayment or credit card due tends to show up on your credit record and result in a fall in your score. If you had asked anyone in your family to become the loan co-applicant or guarantor in your application, their score too would have a similar impact on your non repayment on time.
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Defaulting your home loan can drastically bring down your credit score by nearly 50 to 70 points, which is considerable. Such scenarios might make you ineligible for more credits. Even post the drop, if your score is over average but your history reports default, you still may be looked upon as a risky applicant by the lender.
However, in the case you missed a loan EMI and continue to miss for 90 days, then it may be considered as a minor loan default. This means, you can recoup from the negative impact by taking up prompt right steps like ensuring you repay your missed loan EMIs timely by the upcoming dye dates and any such late repayments do not take place in the future.
Late payment charges –
Missing out on loan EMI even makes you liable for the late payment fees, penal interest, and other important penalties applicable according to the circumstances under which you delayed your EMI repayments. Generally, the late payment charges of between 1 and 2 percent of the EMI amount is incurred. The penalty charge might appear insignificant, but you might require paying the penal interest constituent on the overdue amount for default period instead. This may be in addition to the late payment fees levied by the financial institution. In all, it can be a considerable amount.
Reduced chances of balance transfer –
Missing your home loan EMI repayments might lower your chances to transfer the outstanding loan proceeds to another financial institution offering a lower rate of interest. Owing to the lower score and the reason that you missed the EMI repayment, your prospective lender might think you to be a high-risk applicant. Also, this is why many lending institutions may hesitate to provide the loan for the home loan transfer purpose.
Label of NPA (non-performing asset) –
Until the first two repayments, your lender may send reminders for the loan repayment. However, if you fail to pay your outstanding dues even after ninety days, your lender may mark your home loan as NPA (non-performing asset). After your home loan gets labelled as NPA, you will receive a legal notice wherein you will be asked to make the repayment of the due as permitted by the legal framework of SARFAESI act of 2002. The full form of SARFAESI is Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest. If you do not make the repayment at this specific phase, then after 2 months, the lender will send a notice mentioning the value of the property and that they may auction the same to recover the unpaid dues. The date of auction is generally fixed a month post the notice date, endowing you the adequate time of 6 months before the property auctioning.
What must you do in the case you miss out your EMI on a home loan?
The initial thing that you must ensure to do is to get the things back on proper track and pay the heavy charges incurred on your outstanding home loan dues at the earliest. If you fail to pay in full, then pay the same in parts. However, do not accumulate the dues. This is because waiting for a longer time makes you accumulate a bigger loan burden.
In the case you feel you may not be able to meet the payments on time, then connect with your financial institution. You must ensure to inform your financial institution regarding your condition and your inability to make the loan EMI repayment on time. In the case you hold a strong repayment record, the bank may provide you a leeway, wherein the institution may agree to give you grace period or moratorium of a few months until you become financially stable. If your financial institution is convinced by your reason, you may be able to get back on the proper track within three to six months.
In the case your strained finance is the major reason for your missed loan EMI repayment, you might ask the financial institution to restructure your home loan. Financial institutions might enhance your repayment tenure so that you can better manage your loan EMI and remain within budget.
Whenever you plan to opt for a home loan option, ensure that your finance is in a good line. Make sure that you plan out for all types of your unanticipated occasions or events and keep some emergency fund available. Even then, if such a scenario arises where you are unable to meet your home loan EMIs, ensure to inform your financial institution.