For most Indians, buying a home is a life long dream. The last thing you want is the prospect of the lender repossessing your property because you defaulted on the home loan. The lender does not repossess and auction the property without giving you adequate notice and sufficient chances to repay the loan. The onus is on you to make the best of the time given by the lender and work out alternatives. You can rework your budget, cut on other expenses, sell some of your investments and, above all, negotiate with your lender for a moratorium or rescheduling the loan.
Current RBI regulations permit a one-time rescheduling of home loans for up to 6 months to help people tide over a crisis. As borrowers, if you come across a challenging situation, you must know the options available to you and the best path. In case you are wondering as to what happens if EMI is not paid on time, the answers are here.
The SBI home loan EMI can be reworked and restructured to help you get over the crisis.
Six golden rules in case you are on the verge of default
Often, the borrower exacerbates the situation by avoiding talking to officials. That is not the solution. Here are 6 golden rules to follow in case you find yourself in a financial crisis at any point, and it could impact EMI repayment.
- When you delay your EMI or skip an EMI, the first response from the lender will be to send you a reminder. Normally, a notice is sent only after 2 EMIs are skipped. The first thing you need to do is to keep the channels of communication open. Constant follow-up may create pressure on you, but that is better than running away from the situation. Instead of panicking and avoiding calls, the best way is to respond to such calls and also explain the situation to the lender.
- Don’t delay the meeting with your lender. When you are in a financial crisis, the tendency often is to avoid going to the lender, as the meeting may be quite embarrassing. That is the last thing you should worry about. It is not just the right approach but also your duty to keep the lender informed well in advance. Be proactive and instead of waiting for them to send the notice. You must ideally contact the lender and explain the problem to them and seek solutions. In most cases, lenders respect an old relationship and help you out.
- Ask your lender for a rescheduling of the loan or restructuring plan. Normally, if you are expecting the crisis to be resolved in a few months, you can ask for a moratorium and just pay the interest in the interim period. Alternatively, you can ask the lender to restructure the loan in such a way that the EMI is brought down and you compensate with a balloon payment at the end of each year. Either way, sitting down with the lender helps.
- Talk to your financial advisor. Very often, you are the victim of the maker/checker syndrome. Since you are the concerned party, you tend to miss out on obvious solutions. A well-groomed financial advisor can advise on options like getting temporary funding, using gold loans, etc. These are short-term measures to help you tide over the crisis.
- Revisit your household budget. This is the time to do a zero-based budget. Look for costs you can cut and look for assets you can leverage (like a reverse mortgage on a family property). A critical look at your household budget can give you a lot of answers.
- Last, but not the least, keep a tab on how it would impact your CIBIL score. The last thing you want is for your CIBIL score to fall steeply due to defaults. These kinds of instances have to be reported by the bank to CIBIL and it will be a negative mark on your creditworthiness. Keep a tab on your monthly CIBIL score.
Can the bank actually auction your home?
Most banks use that as the last option, but it is legally possible after 3 defaults. Mostly, banks wait for 6 months and then give two month notice to the borrower before submitting the property to an auction. The good thing is; till the property is sold you have the opportunity to reverse the situation. So, if you are likely to default on your SBI home loan EMI, then first realise the consequences of what happens if EMI is not paid on time. Avert the situation when you can still do it!