What to do if you can’t pay your home EMI

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The facility of home loans has played a significant role in fulfilling the common person’s “dream of owning a house.” Even in big cities, people have started buying flats easily. However, taking a home loan can sometimes become burdensome for you. If you have already taken a home loan or are planning to do so, it is important for you to read this news. It is crucial for you to know under which circumstances banks start exerting pressure on customers for recovery.

In reality, many customers are unable to repay their loans due to job loss or other responsibilities. However, a home loan is considered a secured loan. In exchange, the customer has to pledge his house as collateral with the bank as a guarantee. Therefore, recovery becomes easier in such cases. Nevertheless, banks are compelled to take action against such customers. Let’s find out what actions banks can take against borrowers under certain circumstances.

When does the bank take action? If a customer fails to pay two consecutive EMIs, the bank first sends a reminder. If the customer still does not make the payment for the third EMI, the bank sends them a legal notice to repay the loan. In fact, the bank becomes cautious when a customer fails to pay the third EMI. If a customer does not repay the loan even after receiving a legal notice, the bank declares them as a defaulter. Not only that, the bank considers this loan account as a Non-Performing Asset (NPA). After this entire process, the bank initiates the recovery process.

What are RBI guidelines? As per the Reserve Bank of India (RBI) guidelines, in loans secured by property, such as home loans, the property is mortgaged as collateral for the loan. In the event of default or non-repayment of the loan, the bank recovers the loan by selling the property. This is the final option for loan recovery from the bank’s perspective. In fact, a customer is given a specific timeframe to repay the loan. If a customer fails to make the installment payment within this timeframe, the bank conducts an auction to recover its money. The loan is repaid from the proceeds of the auction.

How much time does the customer get? After sending the notices, the customer is given a two-month period to clear the dues. If the installment payment still remains unpaid, the bank sends a notice of auction along with an estimated value of the customer’s property. If the customer makes the payment even after the auction notice, but before the auction takes place, the auction is cancelled. If the customer still fails to make the payment, the bank proceeds with the auction process.

What are the options? Under the regulations, if a borrower fails to pay three consecutive EMIs, the bank can declare them as a defaulter. This will negatively affect their credit score. In such a situation, it becomes difficult for the borrower to obtain new loans. In that case, if you are unable to pay any EMIs, contact your bank. Ask for time to make the payment. They may provide you with an extension to clear the dues. If you are in a situation where you cannot pay the EMIs, the bank may offer you the facility of loan restructuring. Loan restructuring can allow you to defer payments or reduce the EMI amount for a few months. However, this may increase the duration of your home loan.