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Yogi Zone

Useful articles for your finance management by our team of experts

Unable to pay Home Loan EMI’s? Here’s what you can do!

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unable to pay emiOwning a home is more of a basic necessity rather than a luxury these days. Home loans have been designed to let you not miss out on this necessity. Once the loan is disbursed, the bank expects you to start paying EMIs every month till the tenure of the loan. All would be fine till you pay the home loan EMIs on time. What if you stop paying them because of a medical emergency or losing a job? This can happen especially when you have taken loans at a higher rate. Bankbazaar.com helps compare the best interest rates along with other offers on loans. This article will tell you what would happen if you stop paying EMI’s and the options you have in such a situation.

Will skipping EMI’s make you a loan defaulter?

Usually, banks do not consider you to be a loan defaulter when you skip one EMI. However, if you do it for three consecutive times, you will be sent due reminders of the same. Lack of response from your side will make the bank send a legal notice to you. You will then be termed as a loan defaulter.

What happens if you become a loan defaulter?

Once you become a loan defaulter, the bank will start the process of taking over your property. They can arrange an auction to sell your house/flat and recover their due amount. If you want to take any action, you need to take before this auction. Apart from this, your credit score will also be hit hard and you might not be eligible for loans in the future. This can be the worst thing to happen to you.

Also Read: How bad credit can make your life worse?

What are the options in this situation?

The best option for you would be to negotiate with the lender upon this. Banks will be ready to talk you over this issue rather than going through the tiresome process of taking over your asset. You can reach over to them with the past documents of EMI payments for this loan or the previous loans that you have cleared. Let us see what all options you have in hand:

1)Ask for a grace period – You can seek a grace period from the bank in order to continue with the EMI payments. You can clearly explain to them the reasons for not being able to pay EMI’s such as loss of job or dip in sales of business, etc. Bank may be willing to give you the grace period for resuming EMI payments with some penalty.

2)Loan Refinancing – There could be a case where the interest rates have gone up and hence you may not afford the increased EMI. You can talk to the bank to restructure or refinance your home loan. They can increase the tenure of the loan as a result of which your EMI would go down. Though this will result in you paying more, it will be better than losing possession of the property.

3)Counseling centers – There are counseling centers to help you with this issue. They would provide you the appropriate options based on your situation. They will also give you fair knowledge on the things to be followed so that you do not fall into debt trap. Dena Bank has a credit counseling center which does exactly this.

4)Liquidating your Investments – This will be the final step that you can resort to, if the above options do not work out for you. You can liquidate your existing investments such as deposits or mutual funds to pay the EMI’s. You can also use this amount to make part payment for the loan which will reduce the EMI going forward.

Conclusion

So, these are the options you have in case you default or delay your home loan EMI’s. To avoid such things, you need to make sure that you have at least 5-6 months of expenses kept aside as an emergency fund. This will help you tide over the crisis. You also need individual health insurance and critical illness policy along with riders including that which pays for a loss in job.

  • Yogi Cfp

    Q. I have a home loan (subvention scheme) with DHFL and am paying EMIs since March 2013. The loan was issued at 11.5% for 20 years and by the time subvention ended and EMIs started in March 2013, the interest was increased to 11.75% resulting in a duration increase by 14 months. I received a message this new year that RPLR is further increased by 0.10%!!!

    I am trying to move the loan to a bank, with many banks offering 10.25% but they get stuck since the property is not approved by them as the builder has defaulted on possession timelines.

    What are the options available with me?

    A. You would have two options available in this case -
    1) You can go for refinance of the loan with another bank at a better rate. There will be processing charges levied by new bank up to 0.5% for the switching.
    2) You can talk to DHFL about the same and they might offer you a better rate (may be not the best in the market) by charging some fixed fees from you.

  • p howal

    Hello sir,
    I am great fan of your articles. In the article on unable to pay home loan EMI, there is a mention of critical illness policy with rider which pays for loss in job. I want to know which insurance companies provide such riders.
    Thank you
    P. V. Howal

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