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Missed Home Loan EMI? Know the Consequences

Published On Aug/10/2023

Everyone dreams of owning a home. A house is not just a roof over your head but also an investment for the future. But with real estate prices going up, it has become difficult to buy a house outright. This is where home loans come in handy.

Home loans help you finance your dream home by allowing you to spread the cost of the property over a period of time. You can choose a repayment period that suits your needs and budget. However, with a home loan comes the responsibility of making regular Equated Monthly Installment(EMI) payments.

Missing an EMI payment on your home loan can have some serious consequences. Not only will you be charged a late payment fee, but your interest rate may also increase. In addition, if you miss more than one EMI payment, then your lender may declare your loan as default. This could lead to foreclosure and even bankruptcy. It is very important to make all of your home loan payments on time!

What Happens if EMIs Are Not Paid?

Missing an EMI payment on your home loan can have serious consequences for your finances. It is important to make all of your payments on time in order to avoid these penalties.

Your CIBIL Score Suffers

Your CIBIL score is a three-digit number that represents your creditworthiness. It is based on your credit history, which includes information about all of your past loans and repayments. Your CIBIL score will suffer if you miss an EMI payment on your home loan. This will make it difficult for you to get approval for new loans in the future.

Expensive EMI Payment for the Subsequent Month

When you miss an EMI payment, the bank will charge you a late payment fee. This fee is typically around two to three percent of the EMI amount.

In addition, your interest rate may increase. This means that your subsequent EMI payments will be more expensive than they would have been if you had made all of your payments on time. For example, if your EMI is Rs. 5000 and you miss one payment, then your late payment fee will be Rs. 150 (three percent of 5000). In addition, if your interest rate increases by 0.25%, then your subsequent EMIs will be Rs. 5060 (instead of Rs.5000).

The Lender may Declare your Loan as Default

Foreclosure or bank insolvency is the last thing anyone wants. But if you miss more than one EMI payment, then your lender may declare your loan as default. This means that they can take possession of your property and sell it to repay the loan amount. In addition, if you are declared bankrupt, then this will stay on your credit history for seven years and will make it difficult for you to get approvals for new loans during this time.

How to Avoid Late Home Loan EMI Payment?

It is very important to make all of your home loan EMI payments on time. You can set up a standing instruction with your bank to ensure that your EMI is paid automatically every month. You can also set up a reminder on your phone or calendar to remind you when your EMI is due. If you think you may miss an EMI payment, then please contact your bank immediately and let them know. They may be able to offer you some assistance.

On the other hand, if you have already missed an EMI payment, then there are some things you can do to improve your CIBIL score. You can make all of your subsequent payments on time. You can also contact your lender and try to negotiate a repayment plan. If you are able to repay your loan in full, then this will also help improve your CIBIL score.

What are Home Loan EMI Bounce Charges?

Home loan EMI bounce charges are levied when a cheque or EMI instrument is dishonored by the drawee bank. In the case of home loan EMIs, if there are insufficient funds in your account to honour the cheque, then your bank will charge you a bounce fee. The amount of this fee varies from bank to bank but is typically around Rs.500-1000.

In addition, you will also have to pay the EMI amount again (plus interest) for the next month. This means that missing just one EMI payment can be very expensive! It is important to make sure that you have enough money in your account to cover your home loan EMI every month.

Conclusion

So, what happens if you miss an EMI payment on your home loan? There can be serious consequences for your finances, including a lower CIBIL score, expensive EMI payments, and even foreclosure. It is important to make all of your home loan payments on time in order to avoid these penalties. Follow the best practices when it comes to loan repayment. This includes reviewing the loan agreement, negotiating with the lender, and making all of your payments on time.

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