If you wish to buy your dream house, many lending institutions offer home loans valued up to crores to help you finance and achieve your goal. Due to the size of a home loan, the borrower must repay it throughout the course of the loan's term in consistent, equated monthly instalments. Equated Monthly Instalments, or EMIs, are a convenient and organised way to repay borrowed money. The amount repayable (amount borrowed plus amount to be paid in interest) is divided into equal monthly payments during the course of the loan.

However, there are instances where the borrower is unable to pay off his or her EMI for a particular month because of unforeseen financial difficulties. What follows in such situations, when the home loan EMI bounce occurs? Let's find out.

What Happens When a Home Loan EMI Bounce Occurs?

Missing a home loan EMI can have mainly two types of consequences: Monetary and Reputational.

When a home loan EMI is missed, it is carried over to the subsequent month and must be paid in full by the borrower at that time. In addition to late fines and penalties, the borrower is often charged a penal interest. Let’s know the consequences in detail.

Penalties and charges (monetary): When an EMI is missed, the borrower is subject to EMI bounce charges, which may include penalties and occasionally penal interests. He or she is expected to pay the entire EMI sum in addition to these fees within the allotted grace period, which raises the cost of the EMI as a whole.

Drops your CIBIL score (reputational): What is the EMI bounce effect on your CIBIL score? When a home loan EMI is missed, it significantly lowers down your CIBIL score. Your CIBIL score is considerably lowered when an EMI for a house loan is missed. Your CIBIL score plummets by roughly 60–70 points, which has a negative overall effect on your credit report. Your repayment record is reported to the credit bureaus by lenders and other financial institutions, which reduces your ability to get a new loan in the future.

Must Read: Smart Tips to Improve Cibil Score

Steps To Manage Your Finances When A Home Loan EMI Is Missed:

Contact your Lender: If an EMI is not paid, get in touch with your lending institution right away before your grace period expires and explain why you were unable to do so. Understand and adhere to the lender's recommendations for the optimum course of action for your next move.

Stick to a budget: Create a monthly budget and note your financial spending. In order to manage your EMI commitments, a well-crafted budget can help you understand the inflow and outflow of your money and enable you to reduce unnecessary spending. Google's budget template is a simple tool you may use to record and monitor your monthly expenses.

Control your expenses: Once you've kept track of your monthly spending, look for areas where you might reduce your wasteful spending. It is recommended to save money initially so you can pay off your debts rather than spending a significant portion of your income on luxuries and other items.

Conclusion

Taking a home loan is a huge responsibility in itself, and in order to meet such commitments, you need to be mentally and financially prepared. If your home loan EMI is missed, you may have to deal with some severe repercussions. Therefore, it is wise to estimate your EMI in accordance with the size of your loan well in advance.

We at SMFG Grihashakti provide a EMI calculator for home loan which you can use to estimate your monthly instalments. To calculate your EMI, you will simply have to enter your expected loan amount, interest rate, and the loan tenure to get an estimate of how much expense you will have to incur in order to fulfil your debt needs and help you avoid any missed payments. You can avail of home loans starting from only 9.5%* interest rates (for salaried borrowers) for periods of even 30 years. Check your home loan eligibility today and apply for the loan!