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What to do if you can't afford to pay your EMI?

Suresh Nair is a diligent employee of a well-known construction company headquartered in Mumbai. He has been servicing a home loan for the last couple of years now, but suddenly finds himself in a dilemma, because he has had to fork out Rs 1 lakh as the admission fee of his child and settle the medical bills of his father who has recently undergone a cataract operation. His EMI is due on the 1एसटी of every month and he knows that he will not have enough money to pay it off for the month of June. The likes of Suresh, are not habitual defaulters and his case is a genuine one. Instead of panicking Nair went to his friend Nitin, who is a financial advisor by profession. Here are the things he asked Suresh to do.

  1. Get in touch with your bank: The first thing Suresh was asked to do was to get in touch with his bank. Suresh does not think that his situation will improve drastically in the next six months, so he can consider rescheduling his loan term, by increasing the tenure of his loan. Of course, this means a higher interest outgo, but at least it reduces his EMI burden. Nitin assured Suresh that the EMI can be re-negotiated when his financial position improves.
    If you think that you will be able to pay up in a month because you are expecting a salary hike or a deposit to mature, you can ask the bank to defer the payment until such time. The bank will allow you to do so, but will charge you a penalty on the amount overdue. 
  1. Prioritize your payments: Before you reach out to your bank, it makes sense to look at your portfolio and see if you can juggle your sources of funds to make payments on the home loan account. In fact, you should have a contingency fund to take care of your home loan, car loan and credit card payments in case there is an unforeseen expense as has been on Suresh’s case.
  1. Look for some additional income: Nitin who knows Suresh from school, knows that he is a great writer. With several content writing opportunities in the city now, Nitin has advised Suresh to take up some content writing assignments that will provide him with some extra income that he is desperately in need of at the moment.
  1. Reducing monthly expenses: This is a no-brainer, but Nitin sat down with Suresh and worked out the places where he can save money. It turned out that the Nair family eats out every second week and plans a weekend trip at every given opportunity and a big family vacation once a year. Their entertainment expenses work out to be close to Rs 8000 to Rs 10,000 each month. Suresh and family have decided to take fewer trips and eat out once every month in order to save money.
  1. Check your CIBIL report: Nitin has advised Suresh to purchase his CIBIL credit report and score, once he has cleared all his overdue payments and he is back on his feet financially. If you are in a similar situation, make sure you check your CIBIL report and see that your bank has updated the information on your loan account. If it has not been done, make sure to raise a dispute immediately to get it rectified.

Ideally, you should manage your funds in a manner that you never miss a home loan EMI, but just in case you are in some genuine trouble follow these tips and you may be able to tide over your problems sooner than you thought.