Has your home loan EMI bounced? Do these things to avoid a negative impact on your CIBIL score

A home loan may help you buy your sweet home. For many people, getting a home loan is the only way to buy a property. Home loans may also provide tax exemptions to the borrower. Lenders usually approve 75 per cent to 90 per cent of the total cost of your home, and the borrower needs to arrange the rest of the amount to make the down payment.
 
Meanwhile, Credit Information Bureau India Limited (CIBIL) issues credit ratings based on loan/credit card payback behaviour. If you want to maintain a good credit score, you must pay your equated monthly installments (EMIs) of your home loan on time. Skipping even one payment may hurt your credit score and force you to take loans in the future at high rates.

What happens when you miss your home loan EMI

CIBIL score
When establishing your eligibility for a home loan, your CIBIL score plays a key role. It is prepared based on your previous credit behaviour reported on your credit report. Your previous credit conduct includes loan repayment tenure, timely repayment, credit balance utilisation, and repayment history, among others.
 
Reduces your borrowing capacity
When you apply for a home loan, the bank examines your CIBIL score and your credit report. If your score is low, your application may be rejected, or you may be offered a home loan at a high interest rate.
 
Monetary impact
Late fees, fines, and punitive interest will apply to each missed EMI payment. The penalty is normally 1 per cent to 2 per cent of the late payment. You may even have to pay penalty interest. The penalty interest is imposed in addition to the ordinary interest on your home loan. This considerably raises the amount of interest paid out.

What should you do if you miss paying your EMI?

If you have missed paying your one EMI due to a financial condition, you can talk to your bank manager about not sending your negative CIBIL score report. You should also assure the manager that you will not miss the EMI in the future. The manager may agree to your request, but you might have to pay a penalty with your next EMI.
 
On the other hand, if you are unable to pay the EMI for a longer period, you can request that the bank manager hold your EMIs for some time. You can start paying your EMIs after some time once you are back on your financial track.
 
If your EMI is delayed due to your salary, you can choose the arrear EMI option. Usually, lenders give options of advance EMIs, and the borrower needs to pay the EMI in the beginning of a month, but if you opt for an arrear EMI, you will pay your home loan EMI at the end of each month.

Other tips to avoid missing EMI payments

Auto debit
If your bank allows it, you should use an auto-debit service.

Reminders
Set up reminders to pay your loan EMIs on time and avoid incurring late penalties.

Mark your calendar
Consider setting an alarm on your phone or placing a visual reminder on a paper calendar.