Consequences Of Missing Home Loan EMIs

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.

What Happens if Home Loan EMI is Not Paid?

#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.

#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 to Do If Home Loan EMI Is Missed?

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.

Home Loan Default Consequences in India: Legal Steps

Missing EMIs can lead to serious home loan default consequences in India, especially if delays continue over several months.

• Impact on Credit Score: One of the earliest home loan default consequences in India is a drop in your credit score. This answers what happens if home loan EMI is not paid even once; future loans and better interest rates become harder to access.
• Legal Notices and Recovery Actions: If delays continue, banks send reminder notices and may involve recovery agents. This stage explains what happens if home loan EMI is not paid for multiple months.
• Civil Proceedings: Banks can initiate civil cases to recover dues. These legal actions are a major part of home loan default consequences in India when repayment issues persist.
• Asset Seizure and Auction: In severe cases, property can be seized and auctioned under the SARFAESI Act, highlighting serious home loan default consequences in India.
• Potential Criminal Liability: While rare, deliberate or fraudulent non-payment can lead to criminal proceedings, marking the most severe home loan default consequences in India.

Timeline of Home Loan Default: What Lenders Do After Multiple Missed EMIs

The timeline of default follows a structured process. After one missed EMI, banks usually send reminders and apply late fees. But what happens if home loan EMI is not paid more than once?

After two to three missed EMIs, follow-ups become more frequent and the delay is reported to credit bureaus. This stage clearly reflects early home loan default consequences in India.

If EMIs remain unpaid for over 90 days, the loan may be classified as a Non-Performing Asset (NPA). Recovery notices are then issued, and restructuring options may be offered. Continued non-payment can result in legal action and asset recovery, highlighting serious home loan default consequences in India. Acting early helps minimise financial and legal impact.

In conclusion

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!