Buying a house is the most expensive thing one will ever purchase. To make that purchase happen, some people opt to take a home loan. A home loan sometimes is also known as a mortgage, is an amount of money borrowed by an individual, usually from banks and companies that lend money in return the borrower has to pay equated monthly instalment (EMI). In case you are unable to pay the EMI due to unforeseen situations like job loss, loss in business or medical emergency. To keep a financial discipline in life it is advisable to get an home loan EMI which equals 40 percent of your monthly income. If you have any other EMI’s also to pay then make an adjustment in such a way that you have to make instalments which equal 40 percent of your monthly income. Here are a few points to keep in mind, so you can manage your EMI’s during the tough months.
- Revise Interest Rate of Your Loan
As you are aware that interest rates vary from bank to bank and they keep on fluctuating as well. If you find that any other bank which is providing you with an interest rate which is lower than your current interest rate then you can switch to the other lender, that way you can lower down the price of your EMI.
Lets assume you have taken a loan of Rs 40 lakh at 10% for 20 years. He is currently paying an EMI of Rs 39,935. After five years, his outstanding loan is Rs 16 lakh. Due to pandemic he lost his job and is now unable to pay EMI but he is getting a better interest rate of 9 per cent with another bank. He decides to move his loan to another bank as now he will have to pay Rs 14,936, which much lesser than his previous amount.
- Opt For Loan Insurance
There are various loan insurances available in the market, which is also sold by the bank employees when you approach for the loan. The loan insurances are used to protect you from the home loan, car loan, or personal loan. The insurance helps in covering the EMI’s in case you are not able to pay the EMI due to job loss. If you have taken the insurance policy against then you are covered to some extent.
- Negotiate With The Bank
If you have missed your EMI payment for a month, then the bank will not take any action. But if you miss on three consecutive payments then the bank will the procedure of selling of the property or the asset attached to your property. In case you have missed it for a month than talk to your bank and ask for a grace period. Most of the times banks listen to you and allow you more time to make the payments.
- Savings To The Rescue
Defaulting on EMIs is not only financially draining but emotional as well. One default can impact your credit score adversely. Utilise your savings if you don’t have money to pay EMIs as paying the EMIs is a moral and legal obligation. But to do this you should have enough savings that you can make monthly expenses as well as outstanding EMIS.
- Dispose of Assets
If you are not left with savings and money to pay the EMIs, you need to look which luxury assets like gold, car, electronic items which is of no use anymore, withdraw PPF fund or surplus land. Use these funds to pay for the part of the payment as it will lower the value of EMI.
Points to remember
- Make sure to do financial planning, budgeting every month. In such a way you will not be able to skip the EMI payments.
- A time period of 90 days is provided before declaring it as a Non-Performing Asset (NPA).
- If a lender is under the process of auctioning the property or any other asset, you can still repay your home loan or appeal to the Debt Recovery Tribunal to stop the auction.
Bottom Line: If you make better financial decisions then you will never fail to repay your loan. Unfortunately if you do then make sure to talk to your lender for the grace period, lower interest rates, dig into your savings or buy a loan insurance.