Consequences of Missing Home Loan EMI
You may rapidly finance your dream home with a home loan. However, many people find it difficult to keep up with regular EMI payments due to the loan’s high size and extended-term (typically up to 30 years). Despite your best efforts, unforeseen circumstances such as job loss or a medical emergency may cause you to default on your house loan EMI payment. In this case, delaying your EMI payment will have negative effects on the next month. However, there are steps you may do to avoid a situation like this in the future. Keep reading to learn more.
What if the home loan EMI is missed?
Missing home loan EMI(s) have distinct implications that differ according to your current position. Whatever the case may be, you will undoubtedly suffer the following consequences:
Drop-in credit score
TransUnion CIBIL and other credit bureaus receive information on your repayment habits from most lending institutions in India. If you miss even one EMI payment, your credit score will suffer. If you had asked someone to be a co-applicant or guarantor on your house loan application, their credit score would have a similar effect.
Defaulting on a loan can lower your credit score by 50-70 points, which is considerable. You may be ineligible for further credit as a result of this situation. If your credit score is above average but your credit history shows defaults, lenders will still consider you a risky borrower after the decline.
Late payment penalties
You may be subject to late fines, penal interest (in some cases), and other penalties if you miss an EMI payment, depending on the circumstances and/or the policies of your lender. The late payment fee is usually between 1% and 2% of the outstanding EMI amount. Although the penalty payment may appear minor, you may be required to pay penalty interest on the overdue amount for the period of default. This would be in addition to any lender-imposed late fines. It could be a substantial sum in total.
Low chance for a balance transfer
If you’ve missed your home loan payment, your chances of moving your outstanding loan amount to another lender with a lower interest rate may be harmed. The prospective lender may consider you a high-risk borrower. Because of your low credit score and the fact that you missed your EMI payment. This is also why most lenders are hesitant to accept your loan for a home loan balance transfer.
Label of non-performing asset
Your lender will send repayment reminders until the first two installments are made. Your lender will designate your loan as a Non-Performing Asset if you do not pay your dues after 90 days after your last payment (NPA). Once you’ve been designated as a non-performing asset (NPA), you’ll receive a legal notice. It requests that you repay your debts in accordance with the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002’s legal framework. If you do not repay at this time, the lender will give you a notice outlining the property’s value. Then it will be auctioned to recoup unpaid debts after two months.
Before taking on home loan debt, you should assess your financial situation and formulate a plan for repaying the loan. Missing an EMI payment on a house loan might have serious financial consequences. As a result, you should calculate your home loan EMI before beginning the application process. To do this computation, you can utilize an online home loan EMI calculator.
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