Unable to pay home loan EMIs? Here’s what you can do

When you miss out on paying your home loan instalments for three or more months, the lender can declare your home a non-performing asset (NPA). Since such homes do not generate any income for lenders, they can take strict action to recover their money. Besides, you must also understand that once your credit score becomes unfavourable by not paying equated monthly instalments (EMIs) on time, you may not be able to borrow from any lender in the future.

Ratan Chaudhary, Head of Home Loans at Paisabazaar, says, “Non-repayment of home loan EMI usually incurs 1-2 per cent penal rates for the borrower. This amount would have to be paid by the borrower in addition to the unpaid EMIs. Additionally, the borrower’s credit score would also be adversely impacted on repayment of the EMI by its due date. If the borrower fails to repay the outstanding EMI within 90 days of its original due date, the home loan will be classified as NPA. Once it is classified as NPA, the lender can take legal actions to recover the dues."

Thus, the crucial thing to remember in such a scenario is to connect with your lender as soon as possible. Contact them and explain your financial hardship and inability to make the EMI payments. They may have specific programmes to assist borrowers facing temporary financial difficulties. Adhil Shetty, CEO of BankBazaar.com, says, “Depending on your situation, you can try negotiating with your lender for revised loan terms. This could involve extending the loan tenure, reducing the EMI amount, or restructuring the loan to make it more manageable for you in the short term.”

Additionally, Chaudhary said borrowers must note that if they opt for restructuring, the re-underwriting of the loan can adversely impact their credit score. If the lender rejects the re-underwriting request, the borrower should seriously consider selling the property and using the proceeds to repay the outstanding home loan.

However, it is best if you consider this one of the last options. In parallel, you must review your expenses and prioritise your financial obligations. It may involve adjusting your budget and reducing discretionary spending to allocate more funds towards your home loan EMIs. Also, consider seeking guidance from a financial counsellor or advisor who can provide personalised advice based on your circumstances. They can help you create a budget, explore debt management strategies, and effectively communicate with your lender.

Key takeaway: Communicating openly and honestly with your lender about your financial situation is essential. They can guide you through the options and work with you to find a suitable solution. If you act promptly and proactively, you can mitigate the impact on your credit score and minimise potential long-term consequences.