In the process of getting a home loan at the cheapest possible interest rate, most of the borrowers fail to consider other home loan charges. One of the most important of them is the late payment charges. You are required to pay a penalty every time you do not pay the loan EMI on time.

The charges vary between lenders and thus, it is essential to check the same when applying for the loan. Some of the most important points regarding the late payment charges are discussed below-

What is Late Payment Charges?

When you take a home loan, you sign a legally binding contract with the lender which says that you will pay the loan EMI on time each month. Based on your preference, the lender will fix an EMI debit date, and the EMI amount will be automatically debited from your bank account every month.

However, if your bank account does not have adequate funds for the EMI, it will be considered that you have defaulted on the loan payment. You will then be required to pay a penalty for the same. This penalty is known as the late payment charge.

How Much is the Late Payment Charge?

The late payment charges vary between lenders. Some lenders charge a fixed fee along with the applicable taxes while others charge a percentage of the overdue monthly instalment. The fixed late payment charges can be in the range of Rs. 500 to Rs. 1,000 for every month of delay.

Lenders that charge a percentage wise penalty generally require defaulters to pay up to 2% extra of the outstanding amount for each default month.

Are There Other Charges for Home Loan EMI Default?

Apart from the home loan late payment charges of the lender, you will also be required to pay a NACH failure charge. When you take a home loan, you will be required to sign an ECS (Electronic Clearing Service) mandate, which allows the clearinghouse to automatically debit the EMI amount from your bank account every month.

This ECS service is offered by NACH (National Automated Clearing House), and you are required to pay NACH failure charges of up to Rs. 750 every time your bank account does not have adequate funds for paying the home loan EMI.

Can Late Payment Also Impact Your Credit Score?

Apart from the late payment charges, you should also know that EMI defaults regularly can affect your credit score negatively and make you ineligible for loans in the future. So, take every possible measure to avoid EMI defaults to keep your-self protected against penalties and negative credit rating.

Learn more about your home loan eligibility here.


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.

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