Know Ways to Manage Home Loan EMIs During Financial Crisis – A Guide

What are the types of real investments

 The real-estate market is a very expensive one. Property prices are very high nowadays. Middle-class families cannot completely rely on their savings while purchasing a property. Therefore, home loans play an important role while purchasing a property in residential areas like J.P Nagar

At a later stage, apart from home loan EMIs, there are many other overhead expenses which may lead to financial stress. But, at any stage, you cannot ignore to pay the EMIs.

In this article, you’ll get to know, how to manage home loan EMIs during the financial crisis.

 What If You Fail To Pay the EMI?

Defaulting on loan payment is a very offensive crime in India. The government has made the rules stringent citing the examples of Vijay Mallya and Nirav Modi.

If you fail to pay the EMI, the bank will issue a notice and consider you as a loan defaulter. Failing to pay the EMI will directly affect your credit score. With a low CIBIL score, it will become difficult getting your future loans sanctioned.

The financial institutions prefer to recover the money rather than getting into legal proceedings and auctioning the security assets. In case of defaulting the EMI multiple times, your loan is classified as Non-Performing Asset (NPA). If you refuse to pay, the officer will ask for the physical possession of the mortgaged property, giving the demand possession notice.

What is CIBIL Credit Score?

The CIBIL credit score is generated using your Credit Information Report (CIR). Your Credit Score decides your eligibility for borrowing. CIR is the credit payment history of an individual across all types of loans and credit institutions.

The CIBIL score is a three-digit rating on your credit history. There are several borrowing factors taken into consideration like repayment history, repayment pattern, number of loans taken and their types, outstandings remaining, and default instances.

The CIBIL score ranges between 300 and 900 points. Your credit score is inversely proportional to the number of efforts put in to get loans sanctioned. The higher score around 900 increases the chances of getting your loans sanctioned from a bank or other financial institution.

A low score around points towards defaults in repayment patterns or discrepancies in your credit history. Every bank or financial institution has its benchmark towards sanctioning the loans.

How to Deal With EMI's During Financial Crisis

You must only borrow the amount you are capable of repaying. You must plan your income pattern and save judiciously. Managing credits efficiently can help you surpass the phase.

You must inform and explain the lender about your present situation. Approaching them will help you to a great extent. He will refrain from taking any extreme measure and help you find ways out of the situation.

In the situation of financial crisis, spend wisely. You must cut away your luxury spending and focus on fulfilling your credit obligations.

Several financial advisors and credit bureaus are out there ready to help you out of the financial crisis. You must contact them as they’ll help you out of the financial crisis and take care of your credit score and debts.

To avoid such situations, you can follow the quick repayment principle. Increasing your EMI by a significant amount every year will reduce the financial stress in the future. Quick Repayment will automatically reduce the outstanding principal amount and lessen the home loan interest burden on the borrower.

You may opt for home loan insurance. In case of a financial crisis, it will take care of your three EMIs. The policies come handy when the borrower dies during the loan tenure so that the burden is, not transferred to the new generations.

You can even ask your bank to reduce the monthly outgo or the EMI. The bank, in return, will reduce your EMI and extend the time period. However, as the time period increases, the interest will also increase. You can pay the interest after you attain financial stability.

How to Plan Your EMI

 Here’s how you should plan your EMI –

 

 

 

 

 

Plan according to your earnings Your present earning plays the most important role in planning your EMI. If you have a stable job then you can afford to pay heavy loans in the beginning. You will never feel the burden of EMIs in the future. You must choose an EMI amount which allows you to save at least 15% of the monthly income.

See your Expenditure You must not only plan according to your current expenditure but you should also keep your future expenditure in mind. You should never ignore the future expenditures like lifestyle expense, kid’s expenses, personal expenses, wife’s expenses.

Your Age Matters  You may not feel the burden of EMI if you take a loan in your 20s because you can always repay it by taking an extra bit of responsibility. At a later stage, salary becomes constant and you’ve to balance it with everything. 

Interest Rate You must choose between fixed interest rate and MCLR-linked-interest-rate carefully. In MCLR linked interest rate, the rate of interest may fluctuate according to banker’s will. The choice must be made keeping in mind the loan tenure 
Certain situations like loss of job, prolonged sickness are unavoidable. You must follow the above steps to manage your credit obligations efficiently. Additionally, you must never ignore the lender’s roll call as defaulting the Home Loan may find you stuck in deep trouble.