Worried about missed Home Loan EMI? Here are the consequences and remedies

Home Loan EMI is an important payment that needs to be done diligently. But what happens if you miss it? Do you know of the consequences? Read to know all about it

A home loan is a long-term commitment of at least 15-20 years on average, and, on the other hand, life is too uncertain. While having your own home is a blessing, not being able to pay EMIs on time can be worrying. However, there are remedies for that as well. Every home loan borrower needs to be aware of the consequences of missing an EMI and know how to get on track again.

What are the consequences of failing/missing a home loan EMI?

When you miss or fail to pay an EMI on your home loan, you need to be aware of four primary consequences. 

1. Negative impact on your CIBIL Score

CIBIL Score is a credit rating metric verified by the lenders when lending money to the borrower. As you may know, CIBIL Score depicts how financially stable you are and your credit history. This score gets affected when you miss any EMI or do not repay your debts on time. The score may drop by 50 points to 70 points with each missed EMI. 

2. Poor creditworthiness

Your CIBIL Score can increase after a certain amount of time with proper credit management. However, when you miss an EMI, the lenders give comments or reviews in your credit report. These negative comments can impact your future chances of availing of a loan negatively, even though you may have a significant CIBIL Score. 

3. Penal charges

For example, any bank, such as IDFC FIRST Bank, has some penalty charges that it levies when a person misses their EMI. The average penalty charges vary between 1% to 2%. This means a further increase in your overall debt. 

4. Harassment and legalities

If you cannot pay EMIs for over three months, then the banks start sending recovery agents. This can be embarrassing, as well as stressful. You will also get legal notices to repay your loan immediately, which can worsen if you do not take any action. 

5. Losing your dream house

If you fail to repay the loan amount, the worst possible scenario can be losing your house. As per SARFAESI Act, 2002, the lending institution can start the process of auctioning your property to recover their dues if you fail to pay EMIs for 90 days or more. 

What should you do when you miss an EMI?

While the consequences can be grave, there are solutions to boost your CIBIL Score and reduce the penal charges and other impacts, as mentioned above. 

1. Firstly, you need to contact your bank and let them know why you aren’t able to pay the EMIs on your home loan. There can be medical emergencies, job loss, or other issues. There are lending institutions like IDFC FIRST Bank, which may grant you an EMI-free period for three to six months to cope with your financial woes. 

2. You can also opt for part payment of your EMI. This will decrease the amount of interest accumulation to an extent. It can also help you avoid disciplinary charges. 

3. Finally, you can ask your lender to restructure your debt and opt for a lower EMI so that you can pay the same on time. 

The sooner you talk to your lending institution about your financial situation and try different ways to pay the EMIs, and lower the same, the better it will be for your financial and mental health. 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.