How to Avoid Missing Loan EMI: Home Loan, Auto Loan, Personal Loan: It is difficult to repay, here is how to avoid Missing EMI – Borrowers are facing repayment difficulties due to the situation caused by COVID19. This has led to the problem of missing EMI.
Glory and brilliance are not the only such examples. There are many borrowers who are finding it difficult to repay the loan. Whether it is a home loan or a personal loan or a car loan … the situation that has arisen after Kovid 1 after is making it difficult for the borrowers to repay. This has led to the problem of missing EMI.
Debt restructuring facility
The RBI has introduced a debt restructuring facility to provide relief to borrowers. All retail loans can be restructured under the scheme, including home loans, top-up home loans, personal loans, car loans, education loans and gold loans. However, the terms and conditions are left to the banks. Borrowers can choose from a variety of restructuring options. The borrower can either get a full repayment waiver for up to two years or have the option of paying only simple interest on the loan. The loan term can be extended to reduce EMI.
Should you restructure the loan?
Debt restructuring will bring relief, but it will also impose an additional interest burden on the borrower. Whether you choose a repayment holiday or an extension of the loan, any waiver will accumulate unpaid interest which will increase the total cost of the loan. The higher the interest rate on the loan, the greater the impact. For example, if 12 EMIs are missing on a personal loan at 16% interest, two more EMIs will be added during the loan period. Therefore, do not opt for repayment leave if the loan has a high interest rate. When you are restructuring, consider the rest of the loan period as well. Says Raj Khosla, managing director of MyMoneyMantra.com
What should borrowers do?
One way to prevent the extension of a loan term is to pay a simple interest on the loan. The arrears of Rs 39 lakh at 7% interest is approximately Rs 22,500 per month. This is not a very good option as the principal amount remains intact, but borrowers like Sharma will get some relief without extending the term of their loan. When their income improves, they can resume regular EMI payments.
However, some borrowers are not even in a position to pay simple interest. These are people who have lost their jobs due to cowardice or are facing massive pay cuts. Experts say that despite the lack of cash, the borrower should not miss the EMI as it will damage his credit history and jeopardize his credit access in the future.
Where will the money for EMI come from?
Lack of cash is a good time to review your investment portfolio and make some tough decisions, says Rohit Shah, founder of Getting You Rich. If you have term deposits or debt fund holdings, close them to pay your EMI. Now the interest rates are very low and the tax return on term deposits is rarely 4-5%. Shah says low-income insurance plans that offer low life protection and enjoy high premiums should also be put on the chopping block. Surrendering to such useless schemes will not only increase wealth but also free up premium amount.
If you do not want to surrender your insurance policy, you can take a loan against it. LIC offers loans at 9% flat interest rate, which can be obtained in times of crisis.
There are also options for raising money
There are many other options for raising funds, including loans against investments and loans against assets. Loans against property are especially useful in such situations. Being a collateral loan, the interest rate is not very high. Bad debts can be collected by taking out large debts on the property and using the money to pay off personal debts and other expensive debts. Some advisers also suggest that stocks and equity funds should be sold to pay off debts.
Create emergency funds
Lack of money to meet the needs of the people emphasizes the importance of raising emergency funds. Financial planners usually suggest setting aside six months of expenses for an emergency, although this may vary depending on the individual situation. Savings bank account with sweep-in facility or liquid fund is an option to consider. It’s not important to come back here. The important thing is that this money is not used for any other expenses and it is available to the person for a small amount.
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