How To Pay Home Loan EMIs If You Lose Your Job?

A recent study by CMIE – Centre for Monitoring Indian Economy suggests that more than 20 million youth in the age group of 20-30 lost their jobs in 2020 due to the COVID-19 pandemic and the subsequent lockdown measures implemented by the government of India. The study also suggested that urban unemployment, as of July 2020 stood at 9.79%.While the loss of jobs can be challenging to deal with for all, it can be particularly difficult for those who are nursing a big-ticket loan like a home loan. Apart from finding a way to stay safe from the COVID-19 infection, they also must worry about repaying the home loan EMIs. In the absence of income, many people took advantage of the mortarium announced by the RBI (Reserve Bank of India).But, what happens after the moratorium ends? Some may say use the contingency fund to continue repaying the home loan EMI. Let us be honest, it is not possible for everyone to maintain an emergency fund. So, what to do? Here are a few tips that can help you stay afloat and repay the EMIs

If you have lost your job and are struggling with the EMI repayment, the first thing you must do is inform the lender about the loss of employment and income. If you have been diligent with repaying your instalments previously, the lender may help you. You can talk about –

• Deferring the payments for a few months until you find a new job
• Prolong the loan tenure, which will help you reduce the EMI and make it more affordable

Bank fixed deposit (FD) and recurring deposit (RD) are an inherent part of almost every Indian family’s savings plan and investment portfolio. If you have invested any of these saving schemes, now would be the right time to use them for managing home loan EMI payments.Many people, nowadays, have separate funds for travelling, child education, and other purposes. If you have any such specific savings, you can use it to pay the home loan EMIs and replenish the amount later when you get a job again and things are back to normal.

In the purview of the COVID-19 pandemic-related lockdown restrictions many businesses were forced to shut. And, if you were asked to leave the job, the employer may have given you a severance package to compensate for loss of income. This is called severance. Most companies pay at least two to three months of salary as severance. You can use this money to pay the EMIs.

It may seem like the most obvious thing to do, right? You can seek help from any of your friends or family members who are financially sound and can lend you money. This way you can get the necessary funds without worrying about interest on the amount. Also, as you pay the home loan EMIs on time, you can avoid paying the late payment penalty.It is advisable that you give a realistic timeline to repay the amount, as you don’t want to risk your relationship with your loved ones.

If you hold any assets like gold, or silver, you can try to liquidate the same. In the purview of the rising gold prices, you can also consider pledging the jewellery to arrange funds. Alternatively, you can also consider taking a loan against the gold. But, remember, the interest rate on gold loans start from 7% and it can go up to 18% or more. So, do your maths well, and take an informed borrowing decision.Also, if you have invested in mutual funds or any other money-market instruments, you can liquidate the same and use the pay-out for home loan EMI repayment.

If you have purchased a life insurance policy, you can get a loan against it. The interest rate on loan against insurance is usually much lower than the personal loan. You can talk to your insurer to know more about the loan details.

In March 2020, the labour ministry allowed 60 million Employee Provident Fund subscribers to withdraw a part of their savings from the PF account. The EFO allows the subscribers to withdraw up to 75% of the savings or up to three months’ salary (Basic + Dearness Allowance), whichever is lower from their PF account. If your previous employer(s) offered PF, you can utilise the savings to pay your home loan EMI.

It is said, ‘prevention is better than cure.’ The adage perfectly defines the financial situation for many. Now that you have learnt the lesson the hard way, when things get back to normal and you have a steady flow of income, you must focus on building a contingency fund. This will help you mitigate any financial crisis that may arise in the future.Today, financial institutions in India offer a loan for everything. You may find dozens of lenders will to provide home loan , personal loan, car loan, loan against property, etc. And, just because you have a good credit score and you have a good income source, it is advisable to avoid taking such loans unless it is unavoidable and/or an emergency. Similarly, when you have a regular income, it may be tempting to spend on luxuries, but make sure that you don’t splurge unnecessarily.If you have a home insurance policy, you can try to get a clause included in the policy under which the insurer offers coverage against job loss. While it may increase your premium marginally, it can be beneficial in the long run. If a situation arises where you lose a job, the insurer will pay the home loan EMIs on your behalf.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.