Those who have taken home loans could have felt the repayment of the home loan difficult at times during the pandemic. Salaried individuals as well as other businesses found themselves in a financial fix during this time. Many have lost their jobs or shut down their businesses. At the same time salary cuts too have been a common factor affecting the monetary planning for others. Paying timely home loan EMIs is a real challenge during this period. The overall economy is under pressure and so are all of us.
The moot point is how to tackle the home loan obligations amid the Covid stress? A few options are listed here to throw some light on the issue-
- The employees who have been severed from their current jobs are offered severance packages by their employers. The payment could be equivalent to the salary of their notice period. It is advisable to use these funds to pay off the home loan EMIS than anything else. By doing so, the penalty arising from non-payment of loan can be avoided.
- The PPF/EPF account can be used to meet your home loan obligations. Either 75% of the savings or up to three months’ basic salary plus dearness allowance can be withdrawn as per rules. The amount lying in your PPF account can be used to pay off the loan until you find another job. Remittance shall be made in a three days’ time so that it can be adjusted against the outstanding loan.
- You can use your investments to pay the EMIs. Savings accounts or other investments like fixed deposit accounts can be partially withdrawn to pay off EMIs when due. Similarly, mutual fund investments too can be redeemed. Consider those MFs first which carry a higher valuation than the cost of investment leaving you with a larger margin of profit. Fixed deposits and mutual funds are often meant for a longer period to keep your money safely invested and generate some extra income. However, leaving the home loan unpaid will endanger your credit standing and add to your frustration. Later in life if you want to seek any other loan, the current unpaid EMIs may cause a problem as they could have already affected your credit score, when left unpaid. Better not to give Investments another thought and use them as a weapon to shed your burden.
- You can get a loan against your insurance policy at rates lower than those available for getting an unsecured personal loan. Insurance companies also grant such loans for their customers. However, such loans secured against the policy should be resorted to only as a last measure.
- Friends and family too can lend you money. When our nearest and dearest ones come to know about our genuine difficulties, naturally they extend help and do not expect anything in return. Such borrowing is usually based on mutual trust and free of any kind of interest.
- One of the strongest possibilities where you can avoid payment of your home loan instalments is through the latest circular issued by the RBI allowing the lending institutions to permit their borrowers to a moratorium period of three months due to the pandemic situation. A borrower can repay after this three months’ time without attracting any penalty as they are lawfully allowed to do so. The moratorium period is applicable to home loans and the lender cannot consider the borrower as a defaulter during this period for late payment of instalments.
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Bhoi Smrutirekha Dharanidhar