Home loans make buying your dream house so easy! You need not exhaust your savings and still purchase the house you dream about. However, the equated monthly instalments (EMI) of a home loan can be substantial and can consume a part of your income. There could be situations when you are unable to pay the EMI, due to reasons like a medical emergency, loss of job, etc. However, missing out on EMI payments can have an adverse consequence on your finances. Therefore, there should always be a plan to arrange funds for home loan EMI payments.
Here are some ways that can help you pay your home loan EMI’s easily and avoid defaults.
- Contact your lender
The first step you must do is contacting the lender and informing him of your inability to pay the EMI. If you have had a good track repayment record so far, he can give you a grace period or even restructure your EMI for a specific duration. If the reasons for EMI non-payment are genuine, like loss of job, medical emergency, or any short-term difficulty, you can assure him of resuming payment as soon as you are better financially. Your lender can restructure the home loans and even reduce interest rates with certain terms and conditions to ease your financial position.
- Use your investments
You can use your investments to pay your EMI during emergencies. Investments that are giving profitable returns can be withdrawn and sold off to arrange funds for EMI payments. You can sell off your assets like land, gold, car or electronics that you do not use to raise some cash. You can also withdraw from investments like fixed deposits and provident funds. They might not help you pay off the loan entirely but would be sufficient for part payments.
- Borrow against insurance
Many insurance plans cover your home loan EMI for a short period. Therefore, it is suggested to avail an insurance policy with your home loan. You can also avail a loan against your life insurance policy to pay the EMI.
- Borrow from friends
If it’s a short-term issue, you can borrow funds from your family and friends. However, you must plan your finances in a way that you repay them at the earliest. While they might not charge you interest or penalty on late repayment, it could strain your relationship.
What happens when you do not pay your EMIs?
When you miss your EMI payments, the lenders can charge you a penalty or a late payment fee. They do not usually consider you a defaulter or take strict actions on the non-repayment of EMIs for three months. If you continue defaulting on EMI payments even after 90 days, they will send you reminders. If you do not make the EMI payments, they can exercise their right to recover the dues by auctioning off your property under the legal framework of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
There can be adverse consequences of missing out on paying the EMIs of your home loan. Therefore, you must plan your finances well and ensure that you pay the EMI’s timely. However, if you face a financial crunch, you can use the above-mentioned tips. But, ensure that you do not dig into your contingency or emergency fund and keep some savings for rainy days.