What you need to know about missing a home loan EMI payment

With the real estate market soaring and banks offering attractive packages for home loans in India, the number of home owners who have taken home loans has increased by a great number. The government too, is encouraging borrowers by offering subsidies and tax deductions on home loans. This is perhaps the best time to invest in property and as a result, a lot of the working class have managed to become new homeowners by taking a home loan. Which means a huge or substantial part of their income is spent on the repayment of these loans.

But what happens if the borrower is unable to pay his/her home loan EMI. Is he termed as a loan defaulter if he or she is unable to pay one instalment on time? The answer is no. The process of become a defaulter is a long one. If a borrower is unable to pay his home loan instalment once, due to an unforeseeable expense or a financial emergency, the bank will not immediately term him or her as a defaulter. If you miss one EMI the most a bank can do is send you a reminder mail regarding the same. The bank may also call the borrower to ask about when the payment will be made.

The trouble begins if a home loan borrower fails to pay his EMI three months in a row. The bank will send him or her a lot of reminder mails and finally a legal notice. This is when the borrower is termed as a loan defaulter. The term can severely affect one’s CIBIL score, making it difficult for them to borrow in the future. If the borrower fails to respond to all of these notices and calls and still fails to clear his/her dues, the bank will send an officer to their residence to affix a notice on their door or even print a notice in the newspaper. In three months after this, the bank will declare the property as a non-performing asset. In two months after that, the bank will take possession of the property and if the borrower fails to clear his dues in six months the bank will auction it off.

All this can be avoided by doing a few simple things in case the borrower is unable to pay his/her EMI:

1.       Get in touch with bank and inform them about your problems, they may be able to give you some leeway or at least wave off the late charges on your EMI.

2.       Re-negotiate your home loan by increasing the tenure, so you can pay smaller EMIs.

3.      Get home loan insurance in advance, so you don’t need to worry about your loan repayment.