The COVID-19 crisis has turned our lives upside down. The pandemic followed by the lockdown restrictions has triggered unprecedented economic uncertainty in India. A lot of us have lost our jobs, suffered pay cuts, and are dealing with the loss of income. In such times, managing our home loans and paying the outstanding Equated Monthly Installments (EMI) can be a challenging task for many home loan borrowers. As a home loan borrower, if you’re looking for ways to manage your home loans and EMIs effectively during the COVID crisis, here are a few tips you could follow.
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1. Talk to your Bank
The first thing you need to do as a borrower if you find it difficult to manage your home loans and EMIs effectively during the COVID crisis is to inform the bank about your situation. If you have a good credit score and have been diligent in paying your previous installments, your bank will try to help you. So, try not to panic when you can’t pay your EMI for the month. Your bank will be the first entity willing to help you if you are in financial trouble. Talk to your bank and state the genuine reasons that have made you unable to pay the EMIs and ask for alternate options.
2. Avail Home Loan EMI Moratorium if Possible
Try to avail of home loan EMI moratorium if possible, from your bank. Since many people are finding it difficult to repay their home loans during this period, RBI announced a moratorium period that extended for 6 months from March 1 to August 31, earlier this year. This helped many loan borrowers to gain some time to understand and reassess their financial status. Although this moratorium has ended, you can still request your banks for a moratorium. One thing you need to note here is that a moratorium is not a waiver for your home loan, you are just shifting your payment schedules. The interest will continue to accumulate on the outstanding portion of your home loan throughout the moratorium period. So, make sure you can endure the financial burden before availing of the home loan moratorium.
3. Save for Essentials
These are unprecedented times and the situation can turn from good to worse pretty soon. So, it is important that you save and spend your money wisely during this period. You will never know when your income will get cut off. Even if you have uninterrupted income during the pandemic, you need to save a certain portion of your income to be on the safer side. You can start doing this by calculating the expenses and cutting non-essential spending. Try to save money whenever you can and spend only on the essentials. This way you can cut unnecessary costs and use that saved money to pay for your home loan EMIs.
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4. Consult Financial Advisers
Not everyone can single-handedly manage their home loans and EMIs in these difficult times. If you find home loan repayment obligations harder to manage, you can always consult a financial advisor or a credit bureau for help. They can guide you to manage your home loans and EMIs effectively during the COVID crisis and maintain a good credit score.
5. Withdraw from your Provident Fund (PF)
To ease the financial pressure on the loan borrowers and general public, the labour ministry on March 29, 2020, allowed the 60 million subscribers of the Employees’ Provident Fund Organization (EPFO) to withdraw a portion of their retirement savings. According to this announcement, EPFO subscribers can withdraw 75% of their savings or up to the three month’s basic salary and Dearness Allowance (DA) from their PF account, whichever is lower. Withdrawing some amount from your Provident Fund (PF) will help you to pay the home loan EMIs for some months till you find a way to stabilize your financial position.
What Happens if you Default on a Home Loan EMI?
If you fail to pay your home loan EMI payment, the bank will send you a legal notice and may mark you like a loan defaulter. The Government of India has also recently strengthened the laws governing loan defaulters and Non-performing assets (NPAs) by giving more power to the financial institutions to recover the NPAs. On top of this for every home loan EMI you fail to pay, your credit score takes a hit. A lower credit score will make it difficult for you to avail of other loans in the future. If you continue to default on your home loan EMI even after several notices, as a last resort, the bank may get into legal proceedings for auctioning the house. So, try not to default on your home loan EMIs.
Most home loan borrowers are worried about the implications of paying the home loan EMIs in India during this financial crisis. Time is tough for everyone and with the right planning and some additional efforts, you can effectively manage your home loans and EMI during difficult situations. So, try to follow these tips and manage your home loans and EMIs effectively during the COVID crisis.