Why not to be worried about defaulting on your home loan EMI?

Nobody chooses to default on their home loan EMIs. If it happens, it is most often due to circumstances beyond your control. After all, you don’t want to lose your home, the place where you live and perhaps, your most valuable asset. But what can you do if you face unexpected expenses and find yourself scrambling to pay your EMIs? 

The time component here is very important and can change the severity of the consequences. The longer you default, the greater the implications. However, the one thing that happens anytime you default is that your credit score drops. 

Consequences of defaulting on your Home Loan EMI:

(1) Late penalty
The late fee is the first step when you miss your home loan EMI payments. This is imposed as a late payment charge. At this stage, you haven't yet officially defaulted on your EMI payment. The assumption is that you're just a few days late with the payment.

(2) Minor default
If you miss the EMI payments for your home loan for a maximum of 90 days at a stretch, then it is considered a minor default. This is the critical turning point. Once you cross 90 days and you still haven't made the payments, you will have to face severe consequences.

(3) Non-performing asset
If your home loan EMI remains unpaid for more than 90 consecutive days, it can be declared a non-performing asset. Of course, this does not happen right away. There are generally several rounds of discussion with the bank and several deadline extensions before it is declared as such.  The bank can sell your property and try to salvage some value. 

How to avoid defaulting on your home loan EMI

(1) Grace period
If you're going through a spot of financial trouble, you can request a grace period or moratorium from the bank. This is generally provided at the bank's discretion, and your reputation plays a huge role here.

(2) Loan restructuring 
If your financial conditions have changed for a longer term, you can restructure your loan's conditions. For example, you might have to reduce your monthly EMI outgo by opting for a longer repayment period. This will help reduce the pressure on your monthly finances, even if it means an increase in the overall interest outgo throughout the loan. 

Axis Bank's home loan offers flexible EMI payment options over different tenures. You can use the home loan EMI calculator to figure out how to readjust your EMI payments.

 

(3) Loan refinancing
The idea that taking one loan to pay another can be good for you is quite hard to comprehend. But in practicality, if you shift your loan burden to another lender with lower home loan interest rates, you might save a lot on your interest payments. Or you may be able to get a longer tenure, which can help reduce your monthly EMI outgo. For example, check out Axis Bank’s Home Loan rates to see if you can get a competitive interest rate as compared to your existing Home Loan.

Also Read: [Co-borrower defaulting on your home loan EMIs?]

Summing Up

You can easily avoid defaulting on your EMI payments depending on who your loan provider is. You can find a solution if the bank has customer-centric policies. Check out Axis Bank's range of home loans designed to suit your varied needs and fit organically into your life. You can also use the home loan EMI calculator to estimate your maturity amount.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision