The current times are petrifying with many people afraid of losing their jobs or their income. An increase in unemployment is a matter of concern with businesses shutting down and offices laying off their workers to offload their growing operational expenses. The sudden job losses have left many people in a tizzy, especially, those who had taken home loans before the pandemic. Non-payment of the equated monthly instalments (EMIs) often results in lenders confiscating the property against which the loan has been availed.
If you have a long tenure home loan running in your name and are finding it difficult to repay your loans owing to less or no payouts due to the coronavirus pandemic, you can try one or all the following methods to ease the burden of loan repayment.
Benefit from the moratorium offered
There was a recent circular issued by the Reserve Bank of India allowing lending institutions the privilege to allow their borrowers or debtors a three-month moratorium period during the ongoing coronavirus pandemic. The moratorium applies to all kinds of loans including home loans, which means that you will not be labelled as a defaulter if you repay the instalments on your loans post this period. For the unversed, moratorium means a legal authorization to deferment of loan repayment.
Use severance pay
Many organizations while laying off their employees pay severance to their employees equal to the salary of their notice period. If you have lost your job and have received severance pay from your company, do not squander it on frivolous expenses. Instead, use the amount to pay off the EMIs thus, relieving yourself from the burden of penalty that would follow on non-repayment of your loan.
Extract from your provident fund
You have a part of your earnings getting accumulated in your employees’ provident fund (EPF) account. What better time would it be to withdraw the money to pay off your home loan. Government regulations allow withdrawal of up to 75 per cent of the savings or up to three months’ basic salary along with dearness allowance from your EPF account. The accumulated money in your PF account can be used to repay your debt till you find a new job. Money is remitted to your account within three days of application, thus, easing the burden from your debt.
Borrow from loved ones
You may think of borrowing from your friends and family members. It is like taking out a loan without any interest added. Explain to them why you need the money, and they will be most willing to
Liquidate your investments
Dig into your savings and fixed deposits. See if you can use some of it to repay your loan. You do not have to spend your entire savings to repay a major part of your loan. Instead, take out only that much amount that you would need to repay your loan instalments till you get your next job.
Avoid loan against insurance policy
Had you bought any insurance policy in the past? If yes, then you can avail of a loan against the policy that you have. Since the loan would be secured with the policy serving as the collateral, the interest rates on the loan would be much lower than unsecured personal loans. Besides, the insurance company will grant quick approval and disbursal of the loan amount as you are already their existing customer.
Redeem your mutual funds
Do you have any mutual fund that has matured and is now valued at a price higher than the invested amount? If yes, it makes sense to redeem the investments to repay your loan. While assets must be allowed to grow at their own pace, it is a thumb rule to get rid of debts and loans first as the mounting liability negates the effect of the interest and profits earned on assets.
A home loan left unpaid can affect your credit score adversely. Default on loan repayments can result in the lending institutions sending details of your repayment records to CIBIL and other credit rating institutions. This means that you might not only have to lose hold of your property but will also face difficulties while seeking debt and loans from other banks or lending institutions in future. Besides, your bank may also charge late fees and default-related fees, thus, increasing the burden of your loan debt.
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