What Happens If You Miss a Home Loan EMI? Consequences and Solutions

Owning a home is a cherished dream for many. A home loan often makes this dream a reality by providing the financial assistance required to purchase a property. However, with this financial commitment comes the responsibility of timely repayment through Equated Monthly Instalments (EMIs). Missing a home loan EMI can lead to serious financial repercussions, affecting not just your current finances but also your future borrowing capacity.

Consequences of Missing a Home Loan EMI

1. Negative Impact on Credit Score (CIBIL)

   Your credit score, especially your CIBIL score, is a critical factor that lenders consider when evaluating your loan applications. Missing even one EMI can lower your credit score, making it challenging to secure future loans or credit cards at favourable interest rates.

    

2. Late Payment Penalties

   Banks impose late payment charges if you miss an EMI. These fees typically range between 1% to 3% of the overdue EMI amount. This additional cost can increase your financial burden, especially if the EMI amount is substantial. For example, Ujjivan charges ₹500 + GST for every instance of ECS/NACH/Cheque Bounce/SI failures. Also, a penalty fee of 2.5% + GST per month on the overdue amount. You can check Ujjivan’s home loan fees and charges here.

    

3. Increased Interest Burden

   Some banks may increase your home loan's interest rate after consecutive missed EMIs, resulting in higher monthly payments. This extended interest burden makes it harder to manage your loan effectively.

    

4. Loan Default and Legal Action

   Missing multiple EMIs can lead the bank to classify your loan as a Non-Performing Asset (NPA). This may trigger legal actions, including loan recovery procedures and even foreclosure on your property.

    

5. Loss of Collateral

   In secured home loans, the property purchased acts as collateral. Persistent non-payment can lead to the lender seizing and auctioning off your home to recover the outstanding loan amount.

    

What Happen If You Miss Your Home Loan EMI by 1 Day?

Missing your home loan EMI can have a significant impact on your credit score. You may lose 20 – 30 points even if you delay for a day. A bigger delay can have irreparable damage on your credit score. Note that your credit score is calculated based on the last 36 months of credit history. Delaying your EMI payment further, more than 30 days, may cause your credit score drop by addition 60 – 70 points. 

How to Manage Missed Home Loan EMIs

1. Communicate with Your Bank

If you anticipate difficulty in making an EMI payment, inform your lender in advance. They might offer solutions like restructuring your loan or providing a temporary moratorium.

2. Set Up Auto-Debit

Automating your EMI payments through auto-debit ensures timely payments and reduces the risk of missing due dates.

3. Emergency Fund Utilisation

Maintain an emergency fund to cover EMIs during unexpected financial setbacks. This proactive step can prevent payment delays.

4. Loan Restructuring

In prolonged financial distress, request your lender to restructure your loan by extending the tenure or reducing EMI amounts.

Preventive Measures to Avoid Missing EMIs

• Set Reminders: Use calendar alerts or mobile notifications.
• Auto-Debit Facility: Link your bank account to auto-debit EMIs.
• Monitor Cash Flow: Regularly review your income and expenses to ensure sufficient funds.
• Emergency Savings: Allocate funds to cover at least 3-6 months of EMIs.