If you can’t avoid defaulting on your Home Loan, here’s how to handle it
If you cherish the dream of buying a home someday, taking a home loan can fast track this dream and make it a reality. However, home loans are never something that you should dive into without a little research. Before you take a loan, you should consider the home loan interest rates that are available to you and pick one that suits your cash flow. If you’re in the market for a Home Loan, Bajaj Finserv offers the low interest rate!
Defaulting on a home loan can be devastating for more than one reason. Firstly, you will lose the home that you worked so hard to pay for. Besides this, your credit score takes a huge hit, making it hard for you to secure a home loan again in the future. The home loan default rate in India is relatively low, compared to other types of loans, since they’re usually taken out by salaried individuals who can keep up with the EMI payments. Applying for a Home Loan online with Bajaj Finserv reduces the financial burden on you because the processing fees are a mere 0.8%.
In this article, we walk you through the home loan default process. But first, we take a look at some of the options available to you to keep from defaulting on the loan.
- You might be able to negotiate an extension in the tenure of the loan.
- You can defer the payment.
- You can liquidate other investments to keep up with the payments.
These options will keep you from defaulting on the loan, and will have a smaller impact on your credit score. Below, we take a look at how to handle home loan default.
How the Bank Proceeds
Once your financier has pegged you as a defaulter, they classify your property as a Non-Performing Asset (NPA) and will then send you a notice. From the time this happens, you have a period of 60 days to come up with the money to either settle the account or catch up with your payments. If you manage to do this, you will retain ownership of the house and can continue to pay off the loan.
If you’re unable to come up with the funds at this stage, the bank will take possession of your property and will begin the process of auctioning it off. Again, you have a period of 30 days, during which, if you’re able to come up with the necessary funds, you have the opportunity to settle the loan. If this does not happen, the bank will go ahead with the auction of the property.
Once more, you have the opportunity to obtain ownership of the house if you come up with the necessary funds before the sale is finalised.
As you can see, there are plenty of opportunities for you to get the property back if you can secure the funds and catch up with the EMI payments.
Fixing Your Credit Score
The hit that your credit score takes is probably the worst part of the home loan default consequences. Your credit score is integral to your ability to secure any loans that you might want in the future. You will need your credit score to be at least 700 if you hope to be approved for a home loan. A higher credit score also affects the rate of interest that you can negotiate with the bank, and by extension, the monthly EMI payments that you’ll be making.
If your credit score takes a hit from defaulting on a home loan, repairing it is a long and arduous process, so you should avoid defaulting on your home loans as far as possible. Obtaining a credit card and using it responsibly will go a long way towards fixing your credit score. Bajaj Finserv offers good Credit Card deals, which have a great rewards point scheme.
Defaulting on a home loan isn’t the end of the world. If you’re smart with your resources, you might be able to get your home back, and revive your credit score.