Pausing Home Loan EMIs: Understand Your Options and Consequences

Life is unpredictable, and sometimes financial situations can become tight. You might find it challenging to keep up with your home loan EMIs. So, the big question is: Can we stop home loan EMI for a few months?

Yes, in certain situations, you can stop or pause your EMIs temporarily. But it is not a straightforward process, and there are specific steps you need to follow. Here is a guide to help you understand how it works and what options you have.

What happens when you miss your EMI payments?

When you miss an EMI payment, it can lead to penalties, interest accumulation, and a drop in your credit score. It is important to know the consequences before taking any action. Missing multiple payments can cause the lender to classify your loan as a non-performing asset (NPA), which could result in legal action or the bank seizing your property.

So, it is best to avoid skipping EMIs without informing your lender. If you are in a tight spot, there are several ways to handle the situation without affecting your credit score too much.

Here are some options to pause or delay EMI payments:

1. Moratorium period: A moratorium is a temporary suspension of EMI payments. It is usually granted by the Reserve Bank of India (RBI) during times of crisis, such as the COVID-19 pandemic. During this period, you do not have to pay your EMIs, but interest will still be charged on the outstanding amount. This option gives you some breathing room during a financial emergency.

2. Home loan restructuring: If you are struggling to pay your EMIs, you can ask your lender to restructure your loan. This involves revising the loan’s terms, such as extending the tenure, reducing the interest rate, or changing the EMI amount. Home loan restructuring can make it easier to manage your payments, but it might affect your credit score.

3. Loan rescheduling: Loan rescheduling means modifying your repayment schedule without changing other loan terms. This could include skipping a few EMIs and adding them to the end of the tenure. You will pay less monthly, but your loan term will be extended.

4. Loan settlement: If you are facing long-term financial issues, you can ask your lender for a loan settlement. This is a last resort because it can significantly impact your credit score. The lender agrees to reduce the loan amount or accept a one-time settlement, but it is marked as a “settled” account, which may hinder future loan applications.

5. Balance transfer with top-up loan: You can also transfer your existing home loan to another lender with better terms. This way, you can manage your finances better.

What to do if you need a break from EMIs?

If you think you might have trouble paying your EMIs, do not wait until you miss a payment. Contact your lender and explain your situation. Most banks and Non-Banking Financial Companies (NBFCs) have provisions for temporary relief. It is always better to be proactive than reactive.

Here are some steps you can take:

1. Talk to your lender: Reach out to your lender and explain your financial situation. Ask if they have any EMI holiday schemes or restructuring options.

2. Check for moratorium offers: Find out if the RBI has announced any moratorium periods or special relief packages for home loans. These are usually time-bound and come with specific guidelines.

3. Consider partial payments: If you cannot pay the full EMI, check if your lender allows partial payments. It will not stop interest from accruing, but it is better than missing the payment entirely.

4. Explore other financial products: If you are temporarily out of funds, consider other financial products like a personal loan or loan against property. These can provide liquidity to help you meet your EMI obligations.

Pros and cons of stopping EMI payments

Stopping or pausing your EMIs can give you some relief, but it is not without drawbacks. Here are some pros and cons to consider:

Pros:

• Relief from immediate financial stress

• Helps avoid legal complications and property seizure

• Gives time to stabilise your finances

Cons:

• Interest continues to accrue, increasing overall costs

• Possible negative impact on your credit score

• Extended loan tenure or higher future EMIs

Impact on your credit score

Stopping your home loan EMIs, even temporarily, can negatively impact your credit score. If your loan is restructured or rescheduled, it might still reflect as “settled” or “restructured” in your credit report. This could make it harder to get loans or credit in the future. It is essential to understand this before opting for any relief measures.

Alternatives to stopping EMIs

Rather than stopping your EMIs, consider the following alternatives:

1. Part-payment: Make a lumpsum part-payment to reduce the principal amount. This can lower your EMI burden.

2. Extend the loan tenure: Ask your lender to increase the loan tenure to lower your monthly EMI.

3. Switch to a lower interest rate: If your credit profile is strong, request a lower interest rate, which will reduce your EMI.

Additional read: Ways to reduce home loan tenure and EMI

Finding the right home loan solution

While it might not be easy to stop your home loan EMIs for a few months, finding the right solution can make your financial journey smoother. Consider using a home loan EMI calculator to see how different tenures or interest rates can affect your monthly payments.

If you are exploring better loan options or need funds, Bajaj Housing Finance Home Loan offers competitive rates, flexible terms, and fast approval. Whether you want to get a new home loan or opt for a balance transfer, Bajaj Housing Finance can help you find a solution that fits your needs.

Here are some benefits of choosing a Bajaj Housing Finance Home Loan:

1. High loan amount: Turn your dream home into a reality with a high-value loan amount of up to Rs. 15 crore*.

2. Competitive interest rates: Benefit from attractive interest rates starting at just 8.25%* p.a, making your EMIs as low as Rs. 741/lakh*.

3. Quick approval: Enjoy quick loan approvals within 48 Hours*, sometimes even sooner.

4. Flexible tenure: Repay comfortably over a long tenure of up to 32 years, making EMIs easier to manage.

5. No foreclosure charges: Individual borrowers with floating interest rates can foreclose or partially prepay the loan without extra charges.

6. Hassle-free application: Save time with our seamless process and doorstep document collection service.

You can also opt for our home loan balance transfer facility to switch your existing loan to Bajaj Housing Finance for better interest rates and terms, helping you save on overall interest and repay faster.