Beware home loan customers! Non-repayment of EMIs will impact Cibil score; penalty and more

Prices of homes plummeted due to the pandemic-led economic slowdown. As a result, many who had money bought homes at cheaper prices. Homes sold like hotcakes, leading to a serious demand for home loans as well. However, if you have taken a home loan and are unable to pay the dues on time, you can face a serious penalty that can also negatively impact your Cibil score. 

What is Cibil score? 

In simple terms, a Cibil score is a three-digit number that represents an individual's creditworthiness. The higher the score the better your creditworthiness is. 

How non-repayment of loans impact your Cibil score?

If you don’t repay the monthly instalments of your home loan on time then it could have a negative impact on your Cibil score. Experts suggest that if you miss a single monthly instalment then your Cibil score can nosedive by 50-70 points. 

How you can improve your Cibil score? 

You can easily improve your Cibil score by paying your missed monthly instalment with the next EMI along with the late fee. Your Cibil score will then improve again slowly. 

Other penalties on non-repayment of monthly instalments

Besides negatively impacting your creditworthiness, non-repayment of monthly instalments also calls for late fees and penalty. Usually, banks charge 1-2% of your monthly instalments as a penalty. In some cases, however, you’ll also have to pay interest on the defaulted amount in addition to the late fees. 

What to do if you can’t repay your home loans? 

If you are not able to repay your home loans in case of job loss or other emergencies then you should contact the lending bank or NBFC as soon as possible. Usually, banks listen to your problem and can extend your repayment time to 90 days. 

If you don’t repay any monthly instalment within 90 days then banks can mark your loan as a non-performing asset of NPA and then will put your house on bidding according to the Bank Sarfaesi Act 2002. 

You can also increase your loan duration to reduce your monthly instalments. However, doing so will increase the overall interest that you’ll be paying to the bank in the long run.