InvestorQ : I missed an instalment of my home loan EMI. What can I do to salvage the situation?
Rohan Bhadani made post

I missed an instalment of my home loan EMI. What can I do to salvage the situation?

Swapnil Sarang answered.
3 years ago

It is not easy buying a home anymore. Not only do you have to take tremendous efforts in finding a house you like, a house doesn’t even come cheap. In fact, most people have to avail of a bank loan to fund, if not completely, their purchase as banks do not sanction loans over 70% of the loan amount. Hence, you have to start saving up big time to pay a part of the total proceeds. Now for many buyers, home loan equated monthly instalments (EMIs) constitute a significant portion of regular outgoings. And there can be instances when you are unable to meet your EMI requirements regularly. This could be for varied reasons such as a family emergency or a loss of job, among others. But you cannot afford to sit and not do anything if you have missed an instalment. When you miss out on an instalment, the interest will continue being added to your overall outstanding balance, and hence, your loan will get pricier by every day.

So, here’s what you can do to rectify the situation and get back on your payment track: Rule #1: Do not panic Do not ignore the situation and do not panic, either for neither can salvage your situation. Your bank will reach out to you and it will be best if you talk to them and help work out a solution

Rule #2: Contact your bank Banks do tend to reach out to you when you miss an instalment, but this is not a rule. If you have followed Rule #1, then you need to contact your bank as soon as you come to know of it.

If you anticipate having difficulty paying your EMI, contact the bank and explain the situation to them. If you have a good repayment track record, the bank will be willing to offer you some leeway. Banks usually interact with the borrower to understand the reason for the default in payments. If it is satisfied and believes your problem to be genuine, then it will help by offering to delay the payment. The bank might also extend your home loan term so that your repayments get smaller and hence, more manageable. You can also ask your bank to restructure your loan by either reducing the EMI or loan tenure. Rule #3: Get financial guidance You can also seek help of some financial counselling centres. These centres usually provide free service and assist you by analysing your situation and providing options. These centres can help you draw up a budget so that you figure out how to meet your loan payments. Additionally, they provide advice on how to talk to your lender about your repayments and the various options open to you. Rule #4: Draw up a budget In case you wish to skip Rule #3, have a look at your finances and draw up a budget that you will be able to stick to. It is practical to adopt this practice even if you are not under any financial duress to meet your loan repayments as it will help you gain control over your money. Start by looking at your financial statements and calculate your income sources as well as expenses. This could help identify expenses that can be curbed and thus, free up come capital to be used to repay your home loan. It is advisable to live frugally if you are on the verge of losing your home.

Check if your insurance policy covers job loss. Some insurers offer policies which take care of your EMIs for three months from the date of losing your job; however, the job loss should be due to a lay-off or health reasons. The policy, however, does not cover termination due to poor performance.