In the ongoing COVID-19 second wave, it is very unlikely that the Reserve Bank of India (RBI) will come up with a moratorium-like relief like they did last year. Consequently, it is very important for borrowers to keep paying loan EMIs on time.
However, if they are facing some difficulty in doing that, here are some tips for them:
Cut down expenses
According to Abhishek Soni, CEO and co-founder of Upwards, it is best to cut down on any non-essential spending and continue paying EMIs instead.
Also read | Home loan balance transfer: Should you do it?
Communicate with lenders
Anil Pinapala, founder and CEO of Vivifi India Finance Private Ltd suggested that communication with lenders is key as most of them understand that the pandemic has destabilised the financial well-being of most households and are willing to work with borrowers on their loan repayments.
“Timely repayment of loan obligations is the best way forward as they help in building credit score for future loans and reduce overall interest obligations. If, however, the pandemic has impacted borrowers and they need some time to recover, speaking with the lender will aid in understanding options available and help navigate the immediate shortfall,” he said.
Refinance loan at lower rates
As per Pranjal Kamra, founder and CEO – Finology, refinancing the loan at a lower interest rate is one of the simplest ways to save on EMI payments.
"One can do so by opting for the balance transfer option. To do so, they have to make a switch to a different lender that is offering lower interest rates. If the borrower has taken a home loan before 2019, it is most likely that the loan is linked to the MCLR rate where the benefit of the rate cut is not fully passed to the borrower. Thus, borrowers of home loans should shift from MCLR linked rate to RLLR," Kamra advised.
Additionally, many large lenders, Soni of Upwards said, are looking for good quality customers and if borrowers' credit profile is strong, they can foreclose a previous high ROI loan and do a balance transfer to a less ROI loan to save on the overall borrowing and interest expenses.
Borrowers who are facing any difficulties in loan repayment can also contact the lender for loan restructuring, Kamra said, wherein the lender may help in extending the tenure of the loan or reducing the interest rate which will effectively result in a reduced EMI.
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(Edited by : Jomy)
First Published: IST