MONEY9: What to do when you can’t afford to pay the home loan? If the bank declares you a defaulter, what option will you take?
If you have bought a house by taking a bank loan, regular installments are required. If you don’t pay three consecutive installments, the bank can declare you a defaulter and take possession of the property and sell it. What should you do in such a situation?
The second wave of Corona took away Govind’s job, and the payment of home loan ( HOME LOAN ) installments stopped. So, now the bank has pasted the auction notice on the door of his house . This problem is not of Govind alone, but of many people of India. The worst hit of the corona epidemic has been the employment and due to job closure it has become difficult to pay installments ( EMI ).
According to an RBI report, the size of home loans as on March 31, 2021 was Rs 22.4 lakh crore while as of September 2021, NPAs accounted for 6.1 percent of the total loans of banks, which is projected to increase to 8.1 percent by September 2022. The maximum share in it is home loan. If you too are unable to pay the home loan installments, what are your options in such a situation?
What rights does the bank have?
Under RBI rules, if a person defaults on home loan installments for 90 days, the bank puts his entire loan in the NPA category. In such a situation, the bank may demand the full outstanding amount of the loan from you. If you cannot pay the EMI, the bank will declare you a defaulter. So, if you can’t pay an installment, the bank doesn’t consider it too serious, but can increase the pressure on you. Under the SARFASI Act enacted in 2002, the bank has the right to take possession of your mortgaged property and sell it. Thus, the bank gets its money back.
Expert opinion Balwant Jain
, a tax and investment expert, says that if a default occurs, the bank does not take immediate action against it, as its job is not to buy and sell properties. As a lender his aim is to recover the debt on time. The bank tries to recover the money through all possible options before selling your foreclosed property.
Balwant Jain says that if the bank seizes and sells your assets, it does not mean that your problems are over. If the amount you get after selling your property is less than the outstanding loan, you will have to repay it. If the proceeds from the sale of the asset are more than your outstanding loan, the bank will give you this excess amount, but in such a case you will also have to pay capital gains tax. If the house is sold within five years of taking the home loan, all past benefits under Section 80C have to be returned.
How is Sybil affected?
As a rule, information on loan transactions and defaults is required to be reported to agencies like CIBIL. Obviously, your default information will also be recorded in CIBIL, so your credit history will be bad. Hence, you will have difficulty in taking any kind of loan in future. In future, you will find it difficult to get facilities like loans and credit cards.
What action will the bank take?
By law, banks get the right to take possession of the house. In such a situation, it is useless for you to protest against the lender or his representative. These people are law abiding, therefore, you should not misbehave with them. If you behave well, the bank representative will sympathize with you and may even help you. Under normal circumstances, banks try to work out a workable solution rather than taking possession of the house and selling it.
What options do you have?
You can also avail your own loan. If you feel that the option taken by the bank is not viable, you should discuss with the bank officials and try to sell the property on your own rather than through the bank. In this way, you will also be able to get the maximum value of the property.
If you have money left over after paying off your bank debt, you can also check out the possibility of buying a small house. If you live in a posh or expensive area, consider staying in a common area. You will find cheap house there.
Money Nine’s advice
If you want to buy a house or a shop, pay special attention to the ability to repay the loan. Shop in triplicate. Before taking a loan, make a plan A and plan B of how you will repay it. Home loan defaults are a serious problem. So make every effort to fill it regularly.