Of course, a home loan is a convenient way to finance your new house. However, since housing loans spread over a long tenure, staying on track with EMI payments can be challenging. You may miss paying your EMI due to unexpected situations, such as job loss, medical emergencies, etc.
This article will help you understand what happens when you miss an EMI and how to act in this situation.
Consequences of a missed EMI payment
#1 Late payment penalty
You are charged a late fee, interest penalty, and other penalties depending on your lender’s policies. The late payment fee is usually 1-2% of the due EMI amount. If you miss out on a series of EMI payments, this amount can increase significantly.
#2 Decrease in CIBIL or score
Your CIBIL or credit score is based on your repayment records and credit history. Thus, when you fail to pay your EMIs on time, it reflects in your credit score. Failing to timely repay your housing loan EMI can lower your score by 50-70 points. If your CIBIL score drops below 750, it can be challenging for you to qualify for loans in future.
Additional Read: How to Manage Home Loan EMIs during a Financial Crisis
#3 Fewer chances of a loan balance transfer
If your EMI repayment record shows missed payments, lenders will consider you a high-risk borrower. So, if you’re planning to switch lenders to avail of lower home loan interest rates, prospective lenders might be reluctant.
#4 Risk of being labelled as an NPA
If you fail to clear your dues after 90 days of your last payment, your lending institution marks your loan as a Non-Performing Asset (NPA) and sends you a legal notice regarding the dues. If you fail to pay at this stage, your lender will send you a notice stating that your property will be auctioned to recover unpaid dues.
What should you do if you miss an EMI payment?
First of all, don’t worry. If you missed paying an EMI within 90 days of the last payment, it’d be considered a minor default. You can recover by paying off the outstanding dues as quickly as possible. You can also opt for partial payments. Under any circumstances, do not let it accumulate.
If you lack the funds to complete the payment immediately, you may take one of these routes:
- Contact your lender and explain your circumstances to them. If your previous repayment record is decent, the lender can offer you some relief after ensuring that you get back on track within the next 3 to 6 months.
- Ask your lender to restructure your loan. Lenders may increase your loan tenure so that you can manage your EMIs and stay within your budget. You can use a home loan EMI calculator to estimate an affordable EMI value.
Additional Read: Five ways to manage your home loan EMIs better
Make sure that your finances are sound before availing of a housing loan. EMI repayment should not deplete your savings and emergency funds. If you are looking for affordable home loan offerings, Tata Capital is here for you, with attractive interest rates and flexible repayment methods. Check our home loan eligibility criteria and apply today!