25 NOVEMBER, 2021

Once you complete all the formalities and get the home loan, the lender expects you to start paying its equated monthly installment (EMI) as agreed upon. By paying the EMIs on time, you can gradually pay off the entire loan amount and own your dream house. However, what if you are unable to pay the EMIs due to the loss of a job or a medical emergency. Unfortunately, non-payment of EMI can lead to severe consequences.

Here are a few ways to pay the home loan EMIs during emergencies, recommended by experts.

  • Talk to the lender

The first thing you must do is convey your problem to the lender and inquire about the possible remedies. If you have been diligent in paying the past EMIs, lenders will help you find a solution. You can get a grace period and resume the payment after a few weeks if you have a good repayment history and the lender is assured of your credibility. You can also ask for loan refinancing from the lender, where they can reduce the EMI amount by extending the loan tenure. Restructuring the loan will help you manage the EMIs better. You can always use a home loan calculator for more information.

  • Use home loan insurance

If you have taken home loan insurance, it can help you pay the EMI. You can claim the home loan insurance amount to cover your loan. However, it is a short-term solution. If you have lost your job or are facing a critical financial crisis, you might have to look for concrete solutions for EMI payment.

  • Utilize your assets and investments

If you have exhausted your savings and income for loan repayment and still are unable to pay the remaining EMI, your assets can help you. You can liquidate some of your investments like bank deposits and low-yielding mutual funds to arrange funds. You can also withdraw from provident funds and pay off luxury assets like cars or gold. Experts opine that liquidating big-ticket assets can help you generate enough funds to make part payment of your loan, which will help reduce the value of further EMIs.

  • Consequences of non-payment of EMI

No action is taken if you skip one EMI. The lender can send you a payment reminder and could levy a late fee. The lender considers you a defaulter only after you miss three EMIs consequently. After 90 days, your loan gets classified as a non-performing asset, and the lender proceeds to auction your collateral to recover the loan amount.

When you avail a home loan, you must be well prepared for any financial crisis beforehand. You must be careful with your personal finances and avoid being prodigal. Before you avail a home loan, you must have at least 4-5 months' worth of expenses as an emergency fund. This emergency fund can help you meet your financial requirement if the need arises. Experts also suggest having life and health insurance policies to help you cope with medical emergencies so that it does not hamper your EMI payments.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.