Missed Your EMI? Here’s What You Need To Do Next.
Defaulting on your home loan EMI payment can be a distressing experience, and often out of your hand. Here are some things you could do if you have defaulted on your home loan EMI payment, in order to minimize the damage and prevent missed payments in the future.
Types of Defaults on EMI Payments
If you default on your home loan EMI payment, your action is slotted into one of two bands, based on the severity. Let’s take a look.
1. Minor Defaults:
Since banks do not want to sour relationships with customers over one or two missed EMI payments, they slot customers who have made their previous payment within the last 3 months (90 days) into the ‘minor defaults’ category. If you made your EMI payment in January but missed February, this is a minor default.
2. Major Defaults:
As you would have come to assume by now, the ‘major default’ badge is given to those customers who have missed payments for the last three months or more. For instance, if the last EMI payment you made was three, four or more months before the month in question, this is a minor default.
The Consequences
The consequences could vary based on your relationship with the bank. If you have a good home loan track record and have missed only one or two payments, they might settle for a lesser punishment. However, if the bank views you as a liability, the consequences for defaulting on your home loan EMI could be more severe.
1. Negative Effect on your Credit Score
Defaulting on your home loan or home loan EMI payment can have a negative impact on your credit score (CIBIL score), as your credibility towards repayment of loans reduces. It is best to use a home loan EMI calculator to plan your home loan EMI payments in advance.
2. Fines and Penalties.
Banks will want to disincentive borrowers not repaying their loans, resulting in penalties you might have to pay if you miss your home loan EMI payment. Generally, this penalty is about 1-2% of the EMI, though it can accrue quickly if you miss multiple payments.
3. Recovery and Legal action.
Often considered a last resort, a lender might have to resort to legal action or sending a recovery agent to retrieve the funds you owe, which can be a highly stressful experience.
Here’s what to do next
If you have missed your home loan EMI payment, you will most likely have to face the consequences. However, you can take action to ensure you do not default again, thus minimizing the penalties and negative impact on your credit score. Here are some things you can do.
1. Reduce your EMI payments
If you are unable to meet your home loan EMI payments, revisit the home loan eligibility calculator, then your bank and request that the EMI be reduced either by extending the loan tenure, or by converting the loan into a secured loan by putting up collateral.
2. Part Payments
If you happen to have surplus resources, you could make part payment towards your home loan and pay off a bigger percentage, so that you have more leeway in the future.
3. EMI-Free Periods
In case you find yourself in the worst case scenario where your income has been affected for an extended time period, then you could also request your bank for an EMI free period. Often granted by banks to customers with temporary unemployment, this allows EMI payments to be paused (usually for 3-6 months) to provide relief.
Conclusion
Applying for a home loan can be a tricky procedure, as you have to account for your income in the future as well. If you are looking for a home loan you could browse the various options on the Piramal Finance website, and follow this simple sign up process, and get loans upto 5 crores, with flexible repayment options.
How to apply for a home on the Piramal Finance website.
- Navigate to the ‘Home Loan’ Section on the Piramal Finance website.
- Click the ‘Quick Apply’ button.
- Proceed to complete the form
- Upon submitting the form, you will be contacted by a representative with assistance shortly.