When compared to other financial goals such as purchasing a vehicle or accumulating your child’s higher education and your retirement corpus, owning a home is probably the biggest life goal and involves a high level of long term financial commitment in most individual’s lives. Involvement of larger loan amounts and longer tenures often result in home loan EMIs occupying a sizeable chunk in most individual’s financial lives and active work life years. However, as unexpected expenses, income disruptions, or financial exigencies can strike anytime in life, it might become difficult to repay your home loan EMIs in such adverse financial scenarios.
Given that repeated failure to repay home loans, EMIs can lead to loan default, and home loan borrowers can adopt numerous ways to handle their EMI repayments while tackling financial disruptions in life.
Hence, it becomes crucial to know the solutions available to avoid defaulting on home loan EMIs. Explained here are top ways to manage home loan EMIs besides safeguarding your financial health:
Redeem fixed income investments not earmarked for crucial financial goals
One of the first & foremost steps that home loan borrowers can take when facing difficulty in repaying their EMIs is to identify their fixed-income investments in RDs or recurring deposits, debt funds or FDs or fixed deposits that are not maintained for any crucial financial goals. The returns provided by such fixed-income investments are usually lower than the long-term returns generated by other asset classes, especially the equities. Also, the interest earned from such investments generally tends to be much lower in comparison to the interest rate charged on LIC Home loan interest rates and even the lowest-priced loan options amongst lenders. Hence, redeeming your low-yielding fixed-income investments can bail you to in scenarios wherein you are facing difficulty in repaying LIC Home loan EMIs, thereby assisting in avoiding the possibility of loan default.
Request your existing home loan lender to extend the tenure
Reasons such as a dip in monthly income or a rise in existing loan’s EMI upon arrival of loan reset date, due to a rise in lending rates such as LIC Home loan interest rates, often strain a borrower’s finances, leading to difficulty in repaying the existing EMIs. In such scenarios, the borrower can request the lender to extend the loan tenure since a higher loan tenure would bring down the LIC Home loan EMI amount as well, which might assist the borrower in repaying the reduced EMI amount and thereby avoiding possible loan default. Although stretching the loan tenure would imply a higher interest payout, borrowers can try to prepay the loan whenever they have any surplus funds in order to reduce the overall interest cost.
Utilize your emergency fund for paying the EMI
Creation and maintenance of an adequate emergency fund amounting to a minimum of six times your monthly recurring and mandatory expenses, including loan EMIs, rent, SIPs etc., is pivotal to tackle financial exigencies. The uncertainty regarding life events such as sudden job loss or severe illness necessitates the need for this fund. Any such unexpected financial emergency can affect a borrower’s repayment capacity, leading to the failure of ongoing EMIs as well. Having an adequate emergency fund would certainly bail you out of such scenarios. Whenever you are finding it difficult to repay loan EMIs due to any financial exigency, consider utilizing your emergency fund towards repayment of the LIC Home loan EMIs, to avoid attracting any late payment fees and possible damage to your credit score as well, due to any form of delay or missed EMI.
Switch your home loan lender for a lower interest rate
For home borrowers who are finding it difficult to repay their existing loan’s EMIs, going ahead with the option of switching to another lender via balance transfer is a smart way of reducing their EMI burden. Before finalizing any particular lender, it’s prudent to compare them on various parameters such as LIC Home loan interest rates, tenure, processing fee etc., and then switch onto the lender providing a lower interest rate as well as better loan service terms. Doing so would assist in reducing your LIC Home loan EMI amount, and therefore enable you to pay the decreased EMIs. While going ahead with the decision of balance transfer, note that the new lender is likely to consider your request as a fresh loan application, and therefore may levy some associated charges such as processing fee. Therefore, always make sure that the total saving in interest cost through a balance transfer is substantial, and the levied associated costs do not end up outweighing the balance transfer benefits.
Summing it up
More often than not, LIC home loan acts as a gateway in our lives to fulfil our dream to own a home. And with the gradual emergence of increased access to loans, many people tend to end up simultaneously servicing multiple loans, including home loans, car loan etc., either at the same or different time periods of their work-life years. From finalising the location of the property to zeroing in on a suitable lender, the journey towards availing of home loans requires practising due diligence at various decision points in order to strike the right deal for both property and home loan. And a rejection or difficulty faced in any of these steps can take you a step backwards in the journey of owning a home. Moreover, with many home loan lenders putting out offers for various types of customer-centric EMI repayment options, tailor-made to suit varying loan repayment requirements of different borrowers, those serving a form of EMI repayment not suitable for them might be amongst borrowers facing difficulty in its repayment.
Simply put, the big-ticket size and repayment tenures stretching up to 30 years for home loans make it imperative to understand and follow the above-mentioned tips to manage the EMI repayments smartly and avoid defaulting on it, which can at worse lead the lenders towards exercising their right to sell the property whenever the home loan borrower defaults.