Home Loan: 5 crucial points to remember for EMI repayment

NEW DELHI: Buying a house is a fairly lengthy exercise as it involves in-depth research and arrangement of funds. The rising property prices have also made this task difficult. A Home Loan comes to your rescue and fills the gap that arises due to lack of funds for buying a house. It is a long term financial instrument, which involves a large amount to be paid as down payment and a monthly outflow of money, known as Equated Monthly Instalments (EMI).
Banks now offer loans up to 90 per cent of the property value. For example, if you want to buy a home of Rs 30 lakh, then you only need to pay Rs 3 lakh and the bank will pay the rest as loan. The tenure of loan can go up to 30 years subject to fulfilment of eligibility conditions. So, for a loan of Rs 27 lakh and tenure of 30 years, the buyer needs to pay an EMI of only Rs 20.76K at an interest rate of 8.5 per cent.
It is important that you understand how much EMI you would be able to endure, before applying for a home loan. If you default in EMI payment, then it can have severe repercussions on your personal finance.
Importance of paying home loan EMIs on time
Normally people take home loan for a duration of 10-30 years for which EMIs have to be paid regularly. Regular payment of EMIs impacts your CIBIL score positively, which in turn enhances your chance of availing a fresh loan. Failure to do so will have a negative consequence on both the CIBIL score and fresh loan availability.
If you do not pay EMI for more than 2 or 3 months, the bank may put you in the defaulters list and it may ask you to clear the due within the stipulated date. In continuous default cases, the bank may take action by seizing the property, and making a recovery through the auction of the property. Usually, banks try to settle the default case by giving time to the borrower to repay, or asking the borrower to clear the outstanding EMIs gradually. If the delay persists, then a notice from the bank is sent to take the possession of the property first, and finally resorting to an auction date if the outstanding amount is not cleared within stipulated time.
If you have taken a home loan, then it is important to service the EMI on time or you may lose the home you chose after much research and according to your taste, needs and amenities.
Take loan as per your income level
You must consider your income level before you buy a home on loan and not stress your finances for repaying your loan EMI. Also, when buying a home, you should consider components like maintenance charges, security fees, society fees etc. for which you may not get loan, but would need to be paid regularly after shifting to a new home, etc. It is advisable to keep an extra amount handy to meet such expenses, which in turn would not affect your EMI payments.
Take loan for a longer duration
If you are not sure about the consistency of your income, then opt for a longer duration loan to reduce the EMI size. You can pay extra amount over and above the EMI to repay the loan early. In a situation when you are facing liquidity crunch, then you won’t find it difficult to repay the loan EMI.
Pay EMI through Auto Debit
Banks allows you a facility to set an auto debit mandate in your bank accounts to repay the EMI. Once you fix the date for the auto debit, then your account will automatically get debited and the requisite amount would be paid to the loan account. Auto debit helps you to clear the EMI on the due date without hassle and saves you from unnecessary manual payment delays like wrong amount in cheques, cheque clearance etc.
Maintain a contingency fund
Prior to buying a home on loan, you must build an appropriate contingency fund for at least 8 months. It will ensure fund for EMI repayment in case of an emergency or income irregularity. If you have sufficient contingency fund, then you will worry about situation such as late salary or job loss.
Timely payment of EMI improves your financial image and your CIBIL score. You can enjoy living in your home along with your family without any stress of EMI repayment. For stability in your personal finance, you must take all the necessary steps to ensure that EMIs goes on time for your home loan.