Missed Three Home Loan EMIs? Here’s What Happens Next

Defaulting on a home loan can have serious financial consequences, affecting both your present and future stability. It can lower your credit score and make it harder to secure loans later. Here are some key consequences of missing your home loan EMI payments.

First Home Loan Default

The bank sends you payment reminders through SMS and email after you miss your first EMI payment. The reminder will show a link which allows you to pay online. The lender will impose a late payment fee of 1-2 per cent on the remaining home loan balance plus the current EMI payment. Your loan account will resume after you complete this payment.

Second Home Loan Default

Your lender will issue you a warning about your second EMI default, which requires immediate payment of the EMI amount plus penalty charges. The payment deadline will depend on your current financial situation. The bank will detect your first default but legal action will start after you miss your third EMI payment. You should pay the two delayed EMIs right away to reactivate your loan account.

Third Home Loan Default 

After your third consecutive EMI payment default, the bank will categorize it as a minor default and continue sending you payment reminders. However, if you miss EMI payments for more than 90 days or three months, the lender will start the process to auction your property to recover the dues under the SARFAESI Act, 2002.

The first step of a lender after an EMI payment delay involves charging a penalty which usually ranges between 1 and 2 per cent monthly on the overdue EMI amount above a specified minimum threshold. The lender will designate your loan as an NPA when you commit a major default and then start the recovery process. Banks usually send a notice to borrowers before they proceed with NPA classification of their loans.

A default in payment leads to a chain of problems which damages the entire relationship between the lender and the borrower. The same lender will declare all other loans of the borrower as NPAs even if the borrower continues to pay their EMIs promptly.

Skipped Payments Leave Lasting Marks

If you miss three EMIs in a row and don’t pay for over 90 days, your lender reports a major default to credit bureaus. It’s recorded as an NPA, which can significantly drop your credit score and make future loans harder to get.

Borrowers tend to avoid reaching out to their lenders when they experience financial emergencies which stop them from making loan payments. However, stay in touch with your lender if you find yourself in a similar situation. The lender will assess your situation before they present different payment solutions, which might include grace periods or moratoriums, and loan restructuring and settlement options.

An emergency fund acts as a financial shield, protecting you from money worries during times of crisis. Home loan insurance serves as a safety net, safeguarding your family from financial hardship if unexpected events prevent you from paying your mortgage. It’s important to thoroughly investigate all options before making a decision based on your current circumstances.