As per the survey conducted by the Centre for Monitoring Indian Economy (CMIE), the second wave of covid-19 has rendered almost 1 crore Indians jobless. Mahesh Vyas, chief executive, CMIE, further said that nearly 97% of households had witnessed a decline in their income since the beginning of the pandemic last year. The condition is likely to take almost a year to become somewhat better.
While job loss is challenging for everyone, it is harrowing for people carrying a large-ticket loan, such as a home loan. Aside from finding a strategy to avoid the COVID-19 infection, they must also worry about repaying their house loan EMIs. Even though many individuals took advantage of the RBI’s moratorium in the absence of money,
Some people might decide to use their emergency funds, while others may agree to take up a much less-paying job. But to be honest, not everyone will have these options. Mentioned below are some tips to help you stay afloat during this challenging time and repay the EMIs.
Inform Your Lenders
If you haven’t been able to pay your home loan EMIs due to job loss, the first thing that you must do is to inform your lenders about your condition. If you have been a consistent payer of EMIs, your lender may help you manage the situation. Depending upon your previous payment records, your lender may defer your payments until you find a new job or increase your loan tenure to reduce your EMIs and make them affordable.
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Make Use of the Severance Package
Many businesses had to be shut in the purview of the Covid-19 pandemic. If you were asked to leave by your employer, you might have been paid 2 to 3 months of salary as severance. Severance is offered by most of the companies to compensate for the loss of income. You can use this money to pay your EMIs.
Use Your Savings
In a country like India, having fixed deposits and recurring deposits is a prevalent form of savings. If you have also invested in any such plans, this may be the time to use your savings to pay the home loan EMIs.
Liquidate Your Assets
If you have any assets, such as gold or silver, you can consider liquidating them. You may also take a loan against gold, but remember that gold loans come with a high-interest rate. Selling your automobiles or gadgets that may not be very necessary at the moment can help you gather some funds to repay the home loan EMIs. Also, if you have invested in mutual funds or other money market instruments, it may be the right time to liquidate them as well.
Consider Taking Loan Against Insurance
If you have a life insurance policy, you can get a loan against it. The interest rate for such loans is much less as compared to personal loan interest.
Use Your Provident Fund
The labour ministry permitted 60 million Employee Provident Fund users to take a portion of their funds from their PF account in March 2020. The EFO allows users to withdraw up to 75% of their PF savings or three months’ wages (Basic + Dearness Allowance), whichever is less, from their PF account. If your prior employer(s) provided PF, you could use the funds to pay your house loan EMI.
Ask Help From Friends and Family
The last option would be to ask your financially sound friends and family members to help you in this situation. This may also prevent you from paying extra interest and repaying the home loan EMIs on time. Once you get a job and things start falling back to normal, you can repay the amount.
Advice For The Borrowers
According to Ratan Chaudhary, head of home loans, Paisabazaar.com, “Ideally, a home loan borrower should have at least six months of home loan EMIs in his/her emergency fund. This would allow the borrower to continue paying his EMIs even during a job loss”. However, not everyone in the nation can afford to have such an emergency fund in place.
A new borrower can consider taking a home loan insurance and getting a clause of job loss included to avoid such situations. Also, it would be wise not to overspend on luxuries and maintain a contingency fund for such cases