What should be done if unable to pay Home Loan EMIs

Whenever you avail a loan facility from any bank or any other finance company, you are legally and morally bound to repay it in stipulated time along with the interest as per the terms and conditions of the contract. Uncertainties are always there and at any moment of time situation may not be in favor to oblige the payments you are liable for. Circumstances might demand that you could not pay your installments on time or unable to pay back your loan fully or partially. This could be a critical position that needs to be handled very carefully. This will not only reduce your credit score but also impact your creditworthiness in financial market which would again trouble you in future availability of loans.  In such scenario, it becomes necessary to take some preventive measures to escape for any adverse situation that occurs due to nonpayment of loan EMI.

Home loans are secured loans as the loans are secured with the property for which loan is availed. Legally if you fail to pay your home loan EMIs for three consecutive months, lender can exercise his right and send you reminder to make pending payments. Still, if the payment is not done then the lender might take legal action to recover his dues and can go for Auction of the property according to the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Act,2002.  To avoid such difficult time you can opt some other measures which can help you to overcome the situation of default.

Utilize emergency funds: Everyone wants a secure life and for that he maintains an emergency fund. If you are having any fund which you have maintained for contingencies, you can utilize it to pay for your outstanding. It is better to consume these funds rather than to be a defaulter.

Liquidate unused assets: If you are short fall of funds due to any reason, may it be professional like job loss, business losses or any other personal reason like medical emergency or any kind, you can adopt the way, to liquidate any unused asset you have to bridge the financial deficiency. These assets may be of any kind like, unused Car or bike, Gold or Silver Jewellery kept idle in bank locker or anything that can help you to raise funds to clear your outstanding.

Insure your loan: The smart way to secure yourself is to secure the loan by Loan insurance. This definitely would add some burden on your annual earnings but it would be very small against the huge risk of losing a property due to default in repayment of loans. By paying a small premium, a loan can be secured against any unforeseen situation, if occurred; the insurance company would make payment on your behalf as per the terms of the policy.

Short term loans: It is not advisable to take another loan to safeguard yourself from existing loan, but in some situation where you are stuck in short term financial crunches and you are sure enough to get funds in near future, you can go for it to save yourself. Even if you are having Gold then Gold Loan is also a very good option.

Approach the Lender: Always remain in a cordial relationship with your lender. At the time, when you are unable to honor your monthly installments and situation is not in favor for coming months too, it is better to approach your lender, whether a bank or other financial institution, to find out the best possible support. The lender may provide the following options:

Moratorium: In case of genuine reason, lender may offer you a moratorium for a few months in which you can defer you equated monthly installments. This option is extremely beneficial as this would give you time to arrange funds to pay your outstanding, However, during moratorium period, lender might charge the interest on the pending amount which is as per his sole discretion.

Restructuring: Another offer a lender can put forward is to restructure the existing loan with new interest rates, reduced Emi and extended tenure with all new terms and condition. This will reduce the burden on your monthly income but in many cases restructuring the loan have negative impact on your credit score which will affect your future borrowings,

One Time Settlement: Even banks or lenders avoid to be in litigation and to close the matter out of the court they can offer one time settlement. This settlement is solely at lender’s discretion, in which he can either waive off the interest, a few Emis or a demand a reduced full and final amount to close a loan account. This option though looks good to settle a loan but have drastic affect on your creditworthiness as it is considered to be disability at borrower’s part to avail credit in future. Always find out other ways before any full and final settlement.

Selling the property by own: It is the last resort left if unable to raise funds and having no other alternative than to sell the property by own rather to be sold in Auction by lender as per judicial orders. Arranging buyers for your property yourself could fetch you hefty amount and even after repaying your loan you could left with reasonable amount which can further be utilized to own a new home as per your need and budget.

Owning a home is a very big task which becomes a little affordable with the support of various Housing Loan schemes running in the market by different lenders. Due to lengthy tenure, the chances of uncertainties are always there. Therefore, while planning for a Home on the basis of Loans, you should analyze all pros and cons and try to maintain a contingency fund with small savings. Try to make small investments in banks so that at any moment of time, you can utilize these savings in any difficult time and your home against any financial turmoil.



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