With interest rate going up on home loans EMIs have almost doubled, loan tenure have extended almost five years to 25. The borrower now is bearing an increased cost from hiked rates.
What happens if one finds it difficult to pay home loan EMIs on time due to several reasons? First, it is important to convince the bank on the reason (s) for the defaults. Concrete facts, rather than vague statements, will give clearer picture. Also, documents supporting the unfortunate event (s) that ultimately led to the EMI defaults will convince the bank a lot better.
Next, provide an estimate of the time period you may face the crisis. If the bank is assured that the loan can be recovered, it will definitely try to put forth a plan where both your interests are protected. All this can be accomplished without the bank taking any harsh measure. If it is a short-term crisis, the bank might agree to work out a deferred repayment plan in lieu of a fee or collateral security. Meanwhile, dig into your savings to keep afloat while you make alternative arrangements for funds. If it turns out to be a long-term financial crisis and the savings are dipping drastically, the solution is to sell the house. You will need your lender’s consent to sell. The bank will give a document stating its approval for the sale as well as facts relating to the loan. You can sell the property after pre-paying the loan and the loan foreclosure charges.
This is a much better option than the bank-imposed distress sale. Please remember that banks are empowered by law to take possession of the property that is mortgaged to them, to recover the loan outstanding from the borrower.
Having a rented roof over one’s head is more bearable than seizure of one’s property. The whole situation is always very distressing. A little extra effort on your part may save you from this trouble: an insurance product to guard yourself against the risk of becoming a loan defaulter and losing your home. Banks these days offer insurance products bundled with home loans.
