There are times in life when one is faced with an unavoidable financial crunch and as a result may end up missing some EMI payments. In such cases, your bank will allow you pay the missed EMI with that of the next month. But as a customer, you should know what is the true cost of missing an EMI.
A hefty late fee
It may not seem like a large amount on a month on month basis, but calculated on an annualized rate of interest it can work out to be a substantial amount, that you will be required to pay as a penalty. Let’s understand this with an example. Suppose you have a Rs. 40 lakh loan at an interest rate of 10.5% and your tenure for the same is 20 years. Your EMI in this case works out to be Rs 39,935. If you miss a single payment on your mortgage, you pay an unnecessary penalty payment of Rs. 799 (2% per month) at an interest rate of 24% per annum.
You may lose your eligibility for a balance transfer
If you miss the EMI payment on your mortgage three or more times, you will not be allowed to switch your loan to another bank or housing finance institution, even if there is a better opportunity available. No bank will be willing to take you on as a customer as you will be put in the high risk category.
Lowers your CIBIL score
Missing even a single EMI payment has a negative impact on your CIBIL score. Most of the banks and lenders in India now report your repayment behavior to CIBIL and other credit bureaus. A single default on your home loan will shave off 50-70 points on your CIBIL score at one shot.
Sometimes, people may miss payments because of sheer negligence. Following are the cases in which you may end up missing an EMI payment:
Missing a single payment on a housing loan EMI may have direct consequences as you can see here. Taking on a home loan is a huge responsibility and you will have to be up to speed in order to service it well.