All The Consequences You Need to Know If You Missed Home Loan EMI for One Month

A home loan enables people to buy their dream house without worrying about finances. But because of the large amount and lengthy tenure (typically 30 years) of home loans, many people need help to keep up with their home loan EMI payments. Despite their best efforts, sudden events like joblessness or medical expenses may lead to delayed payments. In such cases, missing home EMI payments may show effects later in the month.

What Happens Home Loan EMI Payments Exceed the Due Date?

Missing EMIs may lead to the following consequences on one’s loan terms and fiscal profile:

Credit Score Reduction

All the financial practices of a person have an effect on their credit record. So, missed EMIs are also reported in the credit record, lowering the credit score. If the borrower has added a guarantor or co-applicant to their home loan, the credit history of the guarantor will also be affected.

Also, defaulting on the loan may reduce one’s credit rating by 50-70 points, which is a huge dip in credit score. As a result, one may be disqualified from receiving more credit. Despite the dip, if one’s credit rating remains above normal but their profile shows defaults, creditors will still see them as a risky applicant.

If one misses a home loan EMI beyond three days of the due date, it is termed a small default. One can recover from it by taking quick corrective action, such as making sure that they pay off all the delayed EMIs on the following deadline. By doing so, they can ensure that they are not charged the missed fee by their financer.

Penalties for Late Payment

Missing an instalment also results in late charges, disciplinary action (in certain situations), and additional penalties based on the terms of the loan and the lender. The missed payment charges are usually around 1%-2% of the outstanding EMI amount. Although the fine amount may seem small, the aggregate amount of several missed home loan EMIs might be huge.

Reduced Chances to Transfer Balance

Missed instalments may lower one’s prospects of transferring their existing loan balance to a new lender with a reduced interest rate. Because of their low credit score and default history, the potential lender may see them as a high-risk applicant.

Non-Performing Asset Label

Lenders send debt repayment alerts until the first two payments are received. But if missed home loan EMIs are not cleared within three months after the last payment, lenders classify the loan as a non-performing asset.

Then, the lender sends the borrower a notice outlining the property’s worth, and they sell it to collect the pending debts after two months. The auction date is usually set one month after the notice is sent, allowing the borrower a total of six months until their home is auctioned off.

What Would You Have to Do When Your Home Loan Is Delayed?

If one fails to pay their home loan EMIs, the penalty fee is added to the entire loan balance. This means that the loan sum grows over time. In such situations, one must follow some tips to ensure that they find the right solution:

1. Check with the BankIf one cannot make their EMI payment on time, they should inform their bank as soon as possible. The lender might allow some extension for the home loan EMI if the borrower has a stable settlement history.Banks try to understand the cause of any delays by speaking with their borrowers. If the problem is real, the bank will help by making allowances for potential delays.
2. Get Professional HelpOne can find some financial counselling services that are offered for free. They help by analysing the client’s situation and guiding them by providing choices. A counselling program may also help create a budget to find out how to repay loans. They help with contacting and communicating with the lender about payment delays.
3. Make a BudgetEven without utilising counselling services, one can analyse their finances and develop a plan on their own. One may need outside help with repaying the loans for the short term, but planning their finances can have long-term benefits.One can begin by reviewing their financial records; this involves estimating costs and revenue sources. This helps find out areas where one can cut spending, freeing up money for home loan EMIs. One must also check their insurance policy to find out if it covers job loss. Many insurance companies offer coverage for home loan EMIs for three months after losing a job, but the job loss must result from dismissal or sickness. The policy does not consider removal due to unsatisfactory performance.As a general practice, one must prioritise home loan payments over premium purchases because any delays in the former might lead to them losing their home.

Conclusion

Loans are usually easily available. But before applying for a loan, one must carefully evaluate their financial situation and the capacity to afford the repayment. Missing home loan EMIs has several drastic consequences. As a result, one must ensure that they pay their monthly EMIs on time. To learn more about home loans, visit Piramal Finance. Make sure to check out their other services and products that answer a range of fiscal needs.