A crisis may come knocking down your door and leave you stunned. And when you are faced with such situations, you can severely cut down your expenses but what about your EMI’s? It is something which you have little control and if failed, banks may send you a legal notice. All these delays may affect your credit score and might create difficulties in availing loans in future. Banks usually wait for a few months before they start chasing your for your EMI’s leading to some serious implications like legal cases and auctioning of the house.
To avoid such disastrous situation, one must be thorough with their financial planning. But there are still some situations like losing a job, health expenses, court cases which may put you in a financial crisis. Financial experts say that you should only borrow a loan if you are capable to repay it. You can make a few calculations regarding your income, your expenses, savings and get through any financial crisis successfully.
Tips to Manage your Home Loan During a Financial Crisis
- Inform Banks About your Situation: if you see some signs of a financial crisis, it is better to inform your bank about the ongoing crisis. They may not completely protect you from laws but can help you find some way out. It is advisable to talk to senior officials in the bank. If you have a good credit score and your previous EMI’s were fulfilled on time, lenders will definitely understand your situation.
- Plan your Expenses in Advance: If you plan from the early stage, there are less chances that you run into a financial crisis. Consult a financial expert before you make any huge financial decisions. Buying a home is an expensive investment so you should deal with someone who is a real estate expert. Since EMI is something which you cannot afford to miss, you should keep aside a small amount of money in case of any emergencies. You should begin this activity as soon as you buy a residential property.
- Consult a Financial Expert: If you are seriously in a huge financial crisis and cannot find your way out it is advisable to consult a financial expert. They are highly knowledgeable and can guide you through the crisis.
- Quick Repayments: In order to secure yourself, it is advisable to return your loan amount as soon as possible. Try to increase your EMI amount and each year or ensure a quick repayment of principal amount. This would lower the interest rate and the burden on the borrower.
Benefits of Having a Home Loan Insurance:
A home loan insurance scheme is a plan under which an insurer will settle the outstanding amount of the bank in case of any unforeseen situation.
- Why the Home Loan Insurance Important for Banks?
Banks do not like their money turning into debt. In order to avoid their money turning into debt, banks or lenders requires home loan insurance. This scheme is mainly employed when the buyer of a residential property is the sole earner in the family.
- Why is Home Loan Insurance Important for Borrowers?
Home Loan insurance covers the outstanding loan in a situation when a borrower is unable to pay the required amount in a financial crisis. You may choose a regular plan or the one with additional benefits. Home loan is important as it ensures that the dependents of the borrowers are not homeless in a financial crisis.
Your Options in case you Get Default on Your EMI Plans
- Have a Contingency Plan
Before you take a loan on any residential property or any property for that matter, financial experts suggests preparing a contingency plan of around six months. This will provide you temporary cash and some time to figure out the next plan.
- See How Lenient are Banks With Skipping EMI’s
Generally, banks are not very lenient with skipping EMI’s. The bank may overlook your payments for a month or two and start sending you notices. Banks take a lenient approach in very rare cases. Especially, when the outstanding loan amount is small and selling the property may not be worth the effort. Loans on a residential property are high in amount and hence banks need to be strict while dealing with the default issues.
- Options if you can’t Pay Up
If you realize that your financial crunch is a long term and you won’t be able to repay the loan, you should try selling your residential property on your own. The price obtained at an auction may be lower than the actual amount you need to pay. You should inform the bank about your decision to sell the residential flat in case you want to extend the repayment period by a few months. In such cases, banks may give you additional 5-6 months to repay your loan amount. The owner must quickly work on their feet before the decline in the prices of the residential property.
Financial crisis are never welcoming and can leave you devastated. Being alert about your financial situations is always recommended. Also, never ignore your lender’s calls. This may only worsen the situation. As a last resort, you may liquidate your existing investments, such as deposits or mutual funds to pay your loan.