The mere thought of facing the axe and losing your job can make anyone jittery, especially if it’s an unexpected one. The sudden halt in the regular flow of income can pose a huge hiccup in managing existing debt repayments, more so in the case of home loan EMIs as it probably occupies a relatively larger share of one’s debt repayments than other financial commitments.
Discussed below are some smart ways to handle your home loan EMIs and avoid defaulting on them during this rough patch:
Request home loan lender to increase the loan repayment tenure
Job loss implies a halt in your income inflow, which can certainly lead to difficulty in repayment of your existing home loan EMIs, even if you are paying the EMIs at a low SBI home loan interest rate. Difficulty can especially arise if you had not factored in these debt repayments of EMIs in your emergency fund. As a longer repayment tenure implies smaller EMIs, it would be prudent to convey your financial issue to your lender and request to extend the loan tenure. A longer loan tenure would bring down the EMI amount, which would be helpful in situations of financial crunch, and possibly avoid loan default as well. You can also check the EMI calculation on the SBI home loan EMI calculator.
For instance, if your current outstanding home loan amount is Rs 25 lakh at an interest rate of 9% p.a., and remaining tenure of 12 years, your existing EMI would be close to Rs 28,451. If you request your lender to extend tenure to 20 years, your EMI will come down to Rs 22,493. This monthly reduction of close to Rs 6,000 per in expenses can act as a breather during a financial crunch.
However, remember that since extending loan tenure would imply a higher overall interest payout, try to prepay the home loan whenever you have surplus funds in future in order to reduce the overall interest cost.
Utilize your emergency fund for EMI repayment
If you had been maintaining an adequate emergency fund amounting to at least six times your mandatory and recurring expenses, including home loan EMIs being served with one of the cheapest lenders in the form of SBI home loan interest rate, then this fund can bail you out of financial exigencies such as sudden job loss. As any delay in EMI payment can adversely affect your credit score as well, it would be prudent to utilize your emergency fund to repay your home loan EMIs until you get a new job. Once your regular income inflow resumes, make sure you refill your emergency fund to ensure it remains adequate for future exigencies as well.
Request for a grace period
When facing difficulty in paying EMIs even at the SBI home loan interest rate, which is amongst the lowest in the industry, you can ask for a grace period from the lender. Grace period is a brief moratorium on repayments of loans that can be provided by the lender during your financial crunch due to job loss. During this period, the home loan borrower does not need to repay any EMIs, with the aim to provide a recovery period and land a new job. Once you are able to procure a new job, you can restart the existing home loan’s repayment.
Go for the redemption of low yielding investments.
One of the first and foremost steps home loan borrowers can take when facing difficulty in repaying their EMIs at SBI home loan interest rate is to identify their fixed-income investments which are not designated for any crucial financial goals. The returns that are generated tend to be generally lower than the long-term returns generated by other asset classes like equities. Also, the returns earned as interest from such investments generally tend to be much lower in comparison to the interest rate charged on the SBI home loan interest rate. Hence, going for the redemption of such fixed-income investments can help in getting out of scenarios wherein you are having difficulty in repaying your big home loan EMIs, hence, more importantly, assisting in avoiding a possible home loan default.
Switch your home loan lender for a lower interest rate
For home borrowers facing difficulty to repay their existing home loan’s EMIs, going ahead with the option of switching to another home lender via balance transfer is a smart way of reducing their EMI burden. Before finalizing any particular lender, it is prudent to compare them on various parameters such as whether rates are lower than SBI home loan interest rate or not, offered tenure, applicable processing fee etc., and then switch onto the lender providing a lower interest rate as well as better loan service terms. Doing so would assist in reducing your EMI amount, and therefore enable you to pay the decreased EMIs. While going ahead with the decision of home loan balance transfer, note that the new lender is likely to consider your request as a fresh loan application, and therefore may levy some charges. Therefore, always make sure that the total saving in interest cost through a balance transfer is substantial, and the levied associated costs do not end up outweighing the balance transfer benefits. Also, don’t forget to check the SBI home loan EMI calculator to know your reduced expected EMI after the balance transfer.
Opt for debt consolidation of loans
Borrowers, especially those serving multiple loans, often tend to face difficulty in repaying their existing home loan EMIs. During scenarios like sudden income disruption or life exigencies, the financial responsibility to timely and regularly repay multiple EMIs at different interest rates and due dates can sometimes pose a burden to the borrower. Such a category of borrowers can go for the option of debt consolidation, wherein they would be required to repay only one consolidated EMI at lower rates instead of multiple ones at varying rates.
For instance, existing home loan borrowers can move forward with a request for a home loan top-up, as top-up home loan’s interest rates are generally much lower than those of other loan options such as a personal loan. A borrower can use proceeds from the top-up home loan towards making prepayment of other high priced loans, and just repay the combined EMI of home loan and top-up loan rather than multiple high-cost loan’s EMIs. Even when consolidating loans, make sure to check the SBI home loan EMI calculator to arrive at your expected new EMI, and ensure it is comfortable to repay as per chosen tenure and consolidated loan amount.