Home loan being, a considerable aid in buying the dream home is surely a boon for property buyers belonging to all income groups. But this boon may turn into a bane on the occasion of loan default.
What is Meant by Loan Default?
It is the situation arising from your inability to pay the home loan EMIs for some months. If the period of non-payment exceeds 6 months it might cease the borrower’s legal rights on the property. Thus, it is wise to avoid becoming a loan defaulter.
What to do When a Financial Crisis Appears Unexpectedly Despite All Necessary Precautions?
Given below are a few means of retaining rights on the property in spite of not being able to clear home loan EMIs regularly.
Reducing the EMI
This is a way out to tackle home loan default where you need to ask the lender or bank to diminish your EMI payments. Financial institutions and banks mostly cooperate in such circumstances by making adjustments suitable to your financial condition. The tenure of loan repayment would be extended or the EMI will be curtailed, in that case. Ultimately, the amount accumulating towards the end of the extended period can surpass the initial rate. This solution is ideal for you if the disruption in timely EMI payment is caused by any other financial commitment of yours.
Opt for Refinance
Home loan refinancing means borrowing a loan from a separate bank to clear the existing loan EMIs. This is a means of easing the payment of loan EMIs with high rates since refinancing causes the existing EMI rate to decrease significantly. Just calculate the sum you can afford to repay as EMI and go to the lender where you can avail of the new loan at your proposed EMI rate. As a result, the monthly instalment will lessen while the period of repayment will extend.
Defer EMI Payment
Opting for an EMI holiday is the ultimate solution when you are going through a temporary financial crisis though you will have to pay a deferment penalty the amount of which is significantly small. You only need to reveal the situation to the bank or the financial institution from which you have borrowed the home loan. Ask it to retard the EMI payment until the time you become capable of repaying.
Repayment of the loan can be settled altogether by paying a significant amount of money as a settlement. If you ask the lender or the bank for this kind of settlement, some of the charges will be waived off that will consequently decrease the amount you are required to pay. This is a preventive measure that you can resort to when you are aware of any upcoming financial crunch but adequate cash must be ready at hand.
Keep off from home loan default by purchasing insurance on it. Apart from covering loan repayment on the demise of the borrower, the insurance policy also helps you in managing the EMIs when you aren’t financially uncomfortable paying them off.
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