According to a TransUnion CIBIL report, home loan balance-level delinquencies for more than 90 days have gone up by 13 bps in the October – December quarter of FY 19 -20. Additionally, Housing Finance Companies have witnessed an increase of 49 bps in the balance-level 90+ delinquency rates.
Delinquencies or defaults on a home loan EMI reflect severely in a borrower’s credit report. It can potentially hamper an individual’s credibility to the extent where lenders refrain from advancing any form of a credit to him/her in the future. However, amid financial duress, it becomes sufficiently challenging to continue such payments.
Thence, to avoid risks of default, individuals ought to adopt measures that would cushion such economic crisis and provide them with a buffer to continue repaying their home loans without difficulties.
Ways to Manage Home Loan Installments During Difficult Times
Managing a home loan EMI when in a financial crisis is as challenging a task as any. However, certain measures, both pre-emptive and otherwise, can save the day.
A few such ways are –
Increase loan tenor
One of the most efficient ways to deter default is to lengthen the existing repayment tenor of your home loan. Prolonging a loan tenor would effectively bring down the existing EMIs allowing you the financial leeway to make timely repayments.
You can contact your lender and communicate about the financial constraints that you are facing currently. Also, ensure that you convey your repayment capability upon such lengthening to strengthen your case to your lender. That is one of the ways how you can make a beneficial change to your home loan repayment.
Even though prolonging the loan tenor implies that you need to carry such financial burden for a longer period, it would nonetheless ease your difficulty for the time being. Regardless, you can utilise a home EMI calculator to ensure you do your maths before requesting for a longer loan tenor.
Opt for a home loan balance transfer
In case your current lender is offering nothing in the form of relaxation, such as lowering home loan interest rates or increasing the repayment tenor, then you can opt for a balance transfer. Thereby, starting anew, you can select a longer tenor or a financial institution that levies lower costs of a loan.
In that way, you can effectively bring down your home loan EMI and ensure that it does not strain your current financial standing. Nevertheless, there are a few things to keep track of when you do a home loan balance transfer like the flexibility of tenor, lower charges, and convenient customer service. You can use a home loan installment calculator before a balance transfer to ensure you are putting your best foot forward.
Maintain contingency funds
It is undeniably one of the most effective pre-emptive measures to cushion any financial crisis. Therefore, ensure to set aside a portion of your monthly income periodically into a contingent fund while your financial footing is still firm. That way, you will create a buffer for when any monetary crisis that befalls you like continuing to repay home loan EMIs.
Financial experts suggest that an individual should at least hold 3 – 6 times their monthly income as reserves and grow it to as much as 12 times gradually. It would provide sufficient cushioning when hard times strike and allow you to maintain the fixed obligations sans difficulty.
To prevent defaulting on a home loan EMI, you can liquidate your assets. However, ensure that you first liquidate the ones that bring the least profits and try to hold on to those that can prove profitable in the long run.
Apart from that, if you are availing a brand new home loan, you need to conduct thorough market research to ascertain several features like easy loan EMI payment. For eg. A NBFC may offer you an easy way to pay loan EMI by using the Bajaj Online Payment facility.
Regardless, the key to counter any financial crisis while maintaining the necessary expenses is to adopt strict budgeting. That way, you can restrict unnecessary spending and focus your monetary resources toward necessary expenditures like a home loan EMI.