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Tata Capital > Blog > Loan for Home > How To Pay Home Loan EMIs If You Lose Your Job?

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How To Pay Home Loan EMIs If You Lose Your Job?

How To Pay Home Loan EMIs If You Lose Your Job?

Ask any salaried person what they fear the most, and they’ll say, ‘losing my job.’ A global pandemic has shown us that layoffs are an inevitable vice of the corporate world in times of crisis.

If you lose your job, it will come with many unforeseen challenges, especially if you are in the process of repaying a home loan. Generally, home loans are taken in large amounts resulting in hefty EMIs. While these EMIs are manageable with a steady job, they can prove to be a significant burden on you in the absence of one.

Worried that the numbers on your home loan EMI calculator will increase beyond your reach? 

Read these six simple ways to pay off your home loan EMIs even without a job

1. Utilise your moratorium period

    As per RBI guidelines, a lender can offer you two to three months of a moratorium, depending on your home loan eligibility parameters like the credit score. It allows you to postpone your EMIs without affecting your credit history. In the meantime, you can search for a new job or arrange funds from other sources.

    When the EMIs resume, the deferred payments are added to the outstanding loan amount, and the interest is levied on the revised number. Calculate your new EMI values and total interest amount with a housing loan EMI calculator.

    2. Take advantage of your severance package

      In most companies, employers pay a severance fee to the employee in case of sudden layoffs. Generally, the severance amount is equal to the employee’s salary for the notice period. To avoid penalty charges and additional interest, you can use this amount to pay EMIs for a few months.

      3. Use your Provident Fund to pay home loan EMIs

      In the wake of COVID-19, the government has allowed a non-refundable withdrawal from your PF accounts. As a result, you can borrow three months of basic salary and dearness allowances (DA) or 75% of the PF balance, whichever is less. This amount can help you pay your EMIs until you find an alternate source of income.

      4. Take a loan against your investments to pay home loan EMIs

      Your fixed deposits, stocks, insurance policies, and government bonds can play a crucial role in getting you out of this crisis. You can approach financial institutions to pledge these assets as collateral and avail of a loan against them. Although the interest rate against these securities will be higher than home loans, it can compensate for the penalty charges you have to pay in case of a default Remember that a loan against investments is also a financial commitment, so plan your repayment using a loan EMI calculator.

      5. Liquidate your assets

      Have you been investing in a financial instrument with the goal of accumulating a corpus? This might be the right time to use it as an emergency fund. Tap into your investments like fixed deposits, stocks, mutual funds, gold, etc., and liquidate them to pay off your loan. Yes, you may lose out on some profit. But on the positive side, you won’t have to pay an EMI penalty. Plus, you’ll be able to keep your credit score intact and not worry about your home loan eligibility in the future.

      6. Borrow from your friends and family

      Sometimes, asking your loved ones for financial help could be the best option. Borrowing money from people you know and trust can help reduce the stress of arranging money for your EMI payments.  You won’t have to worry about paying interest or penalties, and you can return the borrowed amount however you want.

      Also, read – Home Loan for Pensioners: Everything You Need to Know

      Inform Your Lender About Job Loss

      When you lose your job, it is essential to inform your lender about the job loss at the earliest. Being transparent helps you explore practical solutions, such as EMI restructuring, repayment holidays, or short-term relief options that prevent missed payments from affecting your credit health. 

      Most lenders appreciate early communication because it helps them assess your situation and support you in keeping your home loan on track. Reaching out quickly also gives you time to review your finances and choose the most manageable repayment plan during the transition.

      Also, read – What Is Credit Linked Subsidy Scheme? How Does It Work?

      Build an Emergency Fund for Loan Repayment Security

      Creating a strong financial buffer is essential when you want to build an emergency fund to secure loan repayment. An emergency fund helps you stay prepared for unexpected situations, such as job loss or medical issues, while ensuring your home loan EMIs continue uninterrupted. Aim to save at least six months of expenses, including your EMI, so that you can manage repayments comfortably during challenging periods.  

      This fund also gives you greater confidence when speaking to your lender about temporary relief options if needed. With a well-planned reserve, you can protect your repayment journey and maintain long-term financial stability.

      Also, read – How to Apply for a Government Housing Scheme?

      Consider Home Loan Insurance for Job Loss Protection

      Home loan insurance can be a practical safeguard when you want to consider home loan insurance for job loss protection, especially if you are concerned about temporary income loss. This cover helps you manage EMIs during periods of unemployment, ensuring your repayments remain consistent even when your income is disrupted. 

      Many policies offer short-term support that prevents financial stress, helps you manage EMIs smoothly, and protects your credit profile. By choosing a suitable plan, you create a safety net that keeps your home loan secure while giving you valuable peace of mind.

      Also, read – What is The Affordable Housing Criteria to be Eligible?

      Plan Ahead: Manage Your Home Loan to Avoid Stress During Job Loss

      Plan ahead to manage your home loan to avoid stress during job loss by focusing on these strategic steps:

      • Assess your financial health: Track your existing commitments, upcoming expenses and EMI obligations to understand how long you can sustain payments during uncertainty.
      • Prepare a contingency plan: Map out what actions you will take if your income stops, such as pausing non-essential spending or redirecting savings towards EMIs.
      • Maintain a stable repayment pattern: Pay your EMIs on time while you are employed to build a strong repayment record that helps you negotiate better with your lender if needed.
      • Identify alternate income sources: Plan small income streams to reduce pressure and maintain financial stability.
      • Stay informed about lender policies: Understand your lender’s restructuring rules, eligibility criteria, and support measures so you can act quickly during challenging phases.

      Also, read – What Is Mortgage Refinancing and How Does It Work?

      Conclusion

      Prevention is better than cure. So, before you apply, assess your home loan eligibility adequately. Use a home loan eligibility calculator to estimate a home loan amount that you can repay comfortably through affordable EMIs.

      A home loan eligibility calculator asks for various inputs like age, minimum salary, monthly obligations, and interest rate to estimate your total loan amount. It considers every situation from best to worst-case scenarios. This way, you can prepare yourself for any unexpected challenges during your home loan repayment tenure. Many financial institutions, such as Tata Capital, have an online home loan EMI calculator and a home loan eligibility calculator to help you with the process.

      Also, many borrowers hide situations like a job loss or a pay cut from their lenders, fearing legal actions. Don’t make this mistake. Instead, inform the lenders of your situation in time. In most cases, lenders will reassess your repayment capacity and revise your repayment tenure accordingly.

      Finally, the most important resolution is to stay calm. Understand and assess your situation objectively and use any of the ways given above to strive forward in these uncertain times. Rest assured that these circumstances will not last long if you take the appropriate steps.

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      FAQs

      Can I request a moratorium on my home loan EMIs after losing my job?

      Yes, you can request a moratorium if you lose your job, but approval depends on your lender’s policies and repayment history. A moratorium offers temporary relief by pausing home loan EMIs, giving you time to stabilise your finances and plan the next steps effectively.

      How can severance pay help in managing home loan repayments?

       

      Severance pay can act as a short-term financial cushion during unemployment. You can use it to manage essential expenses, maintain regular home loan EMIs and avoid repayment delays. It also helps protect your credit score while you search for a new job or explore alternative income sources.

      Is it possible to withdraw from my provident fund to pay home loan EMIs?

       

      You can withdraw from your provident fund for housing-related needs under specific conditions set by the EPFO. This option can help you continue home loan EMIs during income loss. However, it should be used thoughtfully as it reduces long-term retirement savings.

      What types of loans can I avail against my investments to cover EMIs?

       

      You can avail loans against fixed deposits, insurance policies or mutual fund units to manage temporary EMI requirements. These loans provide fast access to funds without liquidating your investments. They usually come with flexible repayment options and help you maintain your home loan repayment track record.

      Are there specific home loan insurance plans for unemployment?

       

      Yes, some home loan insurance plans offer unemployment protection for a limited period. These plans cover a few EMIs if you lose your job unexpectedly. It provides financial stability during difficult phases and helps you manage your home loan commitments without added stress.

      How should I inform my lender if I lose my job?

       

      You should inform your lender immediately through email or phone and explain your situation clearly. Provide supporting documents if required and request available repayment relief options. Early communication helps the lender assess your case and offer solutions such as temporary EMI adjustments or alternate repayment arrangements.

      What are the consequences of missing an EMI payment?

       

      Missing an EMI can lead to late payment charges, a negative effect on your credit score and possible collection reminders from the lender. If delays continue, the account may be classified as overdue. Timely communication with your lender can help you avoid long-term financial challenges.

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