Kiran is 37 years old software engineer living in Pune. Five years back, Kiran took a home loan of Rs. 50 lakhs right after getting married. With his home loan, he bought a 2 bedroom apartment in one of the well-known areas of the city. Kiran’s salary was decent and he never missed an EMI of a loan. Everything was going fine, until August 2019, when Kiran lost his job. Hid bank tried to reach him, but they were unable to contact after he defaulted on his last two home loan EMIs.
Kiran is worried that the bank might start asking for payments and harass him for it. Currently, he is worrying about banks initiating foreclosure and default proceedings. There are many cases like Kiran, where employees have lost their jobs due to several reasons. Losing a job is undoubtedly an unfortunate event that no one can predict. At such a time, managing a financial obligation like home loans becomes extremely difficult. Many people have the same thoughts as Kiran because they do not know that banks also do not want to foreclose the loan.
Banks prefer to recover the loan amount over starting the legal process and auctioning the house. Therefore, they are always ready to negotiate the terms with such home loan customers. In Kiran’s case, the bank would wait before taking any legal action instead of taking any immediate action.
In such conditions where home loan buyers are not able to pay the EMIs, the bank typically prefers to restructure the loan so that repaying will become easier for the customers.
For example, Kiran has taken a home loan of Rs. 50 lakhs with a 10% interest rate and his tenure was 10 years. Kiran was paying home loan EMI of Rs. 66,075 every month, which became extremely difficult after losing the job. Moreover, he has started applying for a new job, but the salary they were offering was lesser than his previous salary. So he is trapped in a very tricky situation.
Finally, after researching his condition, Kiran came to know about the option of negotiating with the bank and he contacted them. As soon as he explained his situation to his bank, they give him an opportunity of increasing the tenure up to 30 years to reduce the home loan EMI to Rs. 43,879. The new home loan EMI is in his budget, and he can pay this amount to the bank in his new salary.
Losing a job is an unfortunate event. Along with financial stress, it stresses you on various levels. But the silver lining to this situation is that you would not lose everything you earned before that. Negotiating the terms of the loan will give you and bank a better option to rework your home loan, and banks help you with this situation.