Summary of this article
Responsible home loan borrowing along with timely repayment forms the basic foundation of proper financial management. You need to make sure that you pay your home loan EMIs without delay and ensure the same continues till the loan gets over.
With residential property getting costlier day by day, opting for a home loan to buy one’s dream home has become a necessity these days. However, the process of securing a home loan requires significant effort from applicants because they must meet all lender conditions and submit all required documentation for approval.
The loan approval marks the start of your financial health journey which depends heavily on making your loan payments promptly. Paying the equated monthly instalments (EMIs) of your home loan without delay is important for several reasons. Here we will explore six essential reasons that significantly influence your payment history.
1. Avoiding Financial Setbacks
Banks and financial institutions typically impose penalties and additional charges for late payment of EMIs. The penalties that financial institutions impose include late fees and increased interest rates along with potential legal consequences in the most severe situations. Paying your EMIs without delay helps avoid unnecessary financial charges that would otherwise make your loan difficult to handle in its entire repayment period.
2. Preserving Credit Health
Your timely EMI payments directly contribute to forming an excellent credit history. Credit information bureaus such as CIBIL, Equifax, CRIF High Mark and Experian monitor your credit history, which includes loan payment records. By paying their EMIs on time, borrowers are able to build strong credit scores that serve as crucial requirements for obtaining any type of loan and securing reduced interest charges. Missing or delaying EMI payments reduces your credit score, which creates obstacles when trying to get credit in the future.
“Repaying your EMIs and credit card bills is the most critical component of your credit score. Prompt payments of your home loan EMIs consistently ensure you are credit healthy, which makes accessing credit in the future easy,” says Ratan Chaudhary, Head of Home Loans, Paisabazaar.
3. Reducing Negative Outcomes
The inability to pay EMI on time will result in multiple adverse effects that will affect your entire financial profile. The combination of penalties and interest charges will create a debt cycle that makes it more difficult to pay your missed payments. The lender has the right to start foreclosure proceedings, which can result in property loss if a home loan borrower defaults on their payments. Your financial security, along with your property protection against repossession, depends on making EMI payments promptly. A home loan borrower who misses payments can trigger foreclosure actions from the lender, who holds the right to take possession of the property.
4. Accumulating Ownership Rights
When you pay your EMIs on time, the equity of your property will rise steadily, which simultaneously reduces your loan amount. The regular payment of your EMIs will lead to increased property ownership until you become the complete owner of the property after the loan period. Delayed EMI payments, on the other hand, will prevent your progress toward homeownership and extend the timeline to reach your financial targets.
5. Enhancing Your Top-Up Loan Eligibility
Staying disciplined with home loan repayments also strengthens your eligibility for a top-up home loan from your lender.
“These top-up loans have no end-use restrictions and are generally cheaper than other alternatives like a personal loan or a loan against a credit card. Those with long tenures left on their existing home loans also get the top-up loans for a longer tenure - usually provided for the remaining tenure of the home loan or for a maximum of 15 years, whichever is lower,” says Chaudhary.
6. Ensuring Security and Mental Comfort
The failure to handle home loan EMIs properly results in financial tension that produces anxiety in borrowers. Regular EMI payments create peace of mind through fulfilling your financial duties and safeguarding both your home property and credit standing. When you make timely EMI payments, you build financial stability which enables you to focus on other aspects of life without facing the pressure of accumulating debt.
Responsible borrowing along with timely repayment forms the basic foundation of proper financial management. You need to make sure that you pay your EMIs without delay and ensure the same continues till the loan gets over.
