4 serious consequences of missing your home loan EMI payments | Mint

In the nation’s ever evolving economic landscape, consistent and on time repayment of home loan Equated Monthly Instalment (EMI) holds immense value.

It is imperative to make sure that the repayment of not only home loans but any other kind of loan is made on time and in seamless fashion to avoid any late payment fees or charges.

Due to the same, missing out on even a single payment or EMI can result in serious financial complications and legal ramifications.

Rishi Anand, MD & CEO, Aadhar Housing Finance Ltd says, “Missing EMIs can damage your credit score, increase debt burden with late fees, and lead to loan foreclosure or legal action. As, the interest continues to accumulate on defaulted EMIs, further increasing your outstanding balance and putting greater pressure on your finances. To avoid this, set up automatic payments, prioritise timely repayments, and communicate with your lender if facing financial difficulties.”

Keeping the above points in mind, here are four critical reasons why staying current on your home loan EMIs is essential:

1. Adverse impact on credit score

Your credit score is simply a reflection of your financial prosperity i.e., how reliable you are in making repayments on time. That is why even a single missed EMI can result in causing a substantial drop in your credit score influencing your future savings and borrowing in a negative way.

• A delay of just one day can result in reducing your credit score by up to 25 to 30 points.
• A month-long delay may result in an even more serious dent, declining your score by 75 to 100 points.
• The negative remarks of default or missed payment can stick on your report for up to 7 years.

2. Accumulation of penalties and additional charges

Missing EMIs can result in financial penalties, legal difficulties etc. These additional costs can strain your financial health further and result in emotional and psychological problems.

3. Risk of legal action and property repossession

Regular non payment can result in several legal difficulties including loss of your property along with other serious economic consequences:

• If you miss three consecutive EMIs then your loan account might be classified as a Non-Performing Asset (NPA). This will make future personal loans and premium credit cards nearly impossible to secure.
• Banks and financial institutions can initiate recovery proceedings against defaulters. These proceedings are initiated under the SARFAESI Act and have the possibility of property auctioning to meet loan shortfalls.
• Further legal actions, seizure of assets etc., can damage your financial standing and creditworthiness to an even larger extent.

4. Long term financial implications

The consequences of missed EMIs extend beyond immediate financial penalties impacting your financial future and economic prosperity.

• A ‘settled’ status on your loan indicates partial repayment. It can lower your credit score by 50 to 100 points.
• Such negative information can stick on your credit report for about 7 years.
• Tarnished credit history can make it tough for you to secure new loans or credit cards.

Hence, missing your home loan EMIs can significantly damage your credit profile. It can negatively influence your credit score, invite penalties and even result in serious legal consequences such as property and asset auctions along with seizure of funds for meeting repayment short falls.

These developments generally take place on court orders still, it is always prudent for borrowers to avoid going in that direction as it creates financial instability, legal difficulties and complicates an individual’s financial prosperity.

Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. Please consult a professional before making loan-related decisions.