What Happens if I miss my Home Loan EMI Payment?

Life is unpredictable, and there is a chance that you may be forced to go without paying one of your EMI's because of unforeseen circumstances. If you miss an EMI payment, you can pay it with next month's EMI along with the late fees charged by your lender.However, there are other consequences too for delaying your regular payments.

Late Fees

Most banks and finance companies charge a hefty rate of interest for late payment of EMI's. For the one month that the EMI is unpaid, you could be charged a late payment penalty as a % of your EMI amount. For example, if your EMI amount is 38,355 and the bank levies a charge of 2% for your late payment, you will pay an extra Rs. 767 as penalty. This may not seem like much, but in this case you are paying interest at 24% on your late payment.

Reduced chances for a home loan balance transfer

If you miss out on your EMI payments 2-3 times, it becomes difficult for you to get a home loan balance transfer . What this means is that you will lose out on the chance to convert your loan to one with lower interest rates. You will be considered to be in the high risk category after defaulting on your payments. This is why other banks and finance companies may hesitate to take up your loan for a home loan balance transfer.

Lower CIBIL score

Your credit rating, or cibil score determines your options when it comes to taking loans. A better CIBIL score gives you access to more finance options and larger loan amounts. Defaulting on a single payment can severely affect your CIBIL score, although this can be recovered over time with regular payments and responsible management of all your debts.

Borrow responsibly

The above consequences are why it is very important to make sure you can handle the repayment of the loan amount you are borrowing. Make sure that your EMI payments are less than 45% of your salary so that you can be better prepared to make regular payments over the duration of your loan. It is important to be comfortable while you are making your monthly payments since a home loan is a long-term commitment of 15-30 years.

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.