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| Home Loan EMIs |
These days buying a home is more of a basic
necessity than a luxury. Home loans are available so that you do not miss out
this necessity. The banks consider your home as collateral and sanction you home loan of eligible amount.
Once your loan has been disbursed, a lender is expected to start paying EMIs
every month till the loan tenure ends.
However, everything will go smooth till you
pay your monthly EMIs on time. But what
if you face a financial crisis such as losing a job or sudden medical emergency
and you default on your home loan EMIs. This article will tell you what can
happen if this situation arises and what options you have in such situations.
- The bank will send you a reminder notice if you miss EMI of a month.
- If you fail to pay EMIs for three consecutive months and you have been constantly ignoring the bank reminders regarding the due payments, then your loan might get declared as Non-performing asset. A notice will be sent to you concerning the recovery process of due payments under the 2002 SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act.
- If a borrower will ignore the above notice also, then bank will send a notice for seizing the property for auction. This notice includes all the details and terms of auction along with the value of property. Usually, the auction date is set after one month of sending the final notice.
- Generally, banks do not like such lengthy recovery process and auction, so there are chances that you might settle and negotiate your dues before this situation arises.
Such borrowers
who are unable to pay back the monthly EMIs are advised to take the corrective measures
as soon as possible and should avoid the banks to get into action. Here are
some options which can be considered.
Meet your lenders
If you are unable
to pay your EMI for a month and have a fair idea of your future financial
situation then do not hope for the things to get better. Meet your lenders
immediately and tell them briefly about your financial situation.
Ask for a grace period
You can try to
get a grace period from the bank by explaining the reason of being unable to
pay the EMIs on time. There are chances that your lenders might consider your
explanation and give you a grace period of 3 to 6 months with some penalty.
Restructure your loan
If you are sure
that your finances will remain tight in the future and you cannot take the
burden of loan EMIs or cannot afford the increased EMIs then you may also ask
your bank to restructure your loan. The extended loan tenure will reduce your
monthly EMIs. In this case, you will be paying more interest than before but
you would protect your home from the auction and you will get the time to fix
up your financial picture.
Transfer your loan
If your bank is
not ready for settlement and negotiation, then you can also transfer your loan
to another bank. But before doing that, you must remember that you will be
facing processing fees and other charges also.
Liquidate your investments
This can be your
final step. You can liquidate any of your existing investments such as mutual
funds, deposits etc. to pay off your loan EMIs. It is advised that you should also
consider doing the part payments of your loan so that it can reduce the EMIs to
go forward.
Conclusion…
You can consider
the above points when you default on your monthly payments. This situation can
be prevented by keeping 5-6 months of emergency funds aside. This would help in
tiding over the crisis. Ideally you should use a home loan EMI
calculator before taking a home loan to ensure that you are able to pay out
EMIs on time. You must also consider taking a health insurance and business
insurance that would help in the times of critical illness and business loss.
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