Changing the date on which your equated monthly instalment (EMI) gets deducted can be difficult. There is no standard policy that lenders follow. Some don't even allow a change in the date.
Sagar Chauhan, 28, an IT professional based in Ghaziabad, had taken a top-up on his existing personal loan from a private bank. He stated that he wants the EMI to be deducted on the 15th of every month.
But due to the agent’s mistake, the bank started debiting his account on the 5th of every month. He is now facing a problem in maintaining the required balance as his company pays salary after 5th.
Changing the EMI cycle for your loan can be cumbersome as it is at the discretion of the lender to do so. It requires multiple internal approvals and setting up of a new mandate. Not only does each lender have a different policy for a change in EMI date, but the same lender can also have different rules depending on the category of customer and different loan products.
Typically, lenders do allow home loan customers to change the EMI date as there is the risl that the borrower may transfer the balance loan amount to another lender. “As there’s a possibility that the home loan customer can end the relationship, lenders tend to change dates for them. But an unsecured loan customer cannot transfer the loan. Many, therefore, don’t allow a change in dates," said a banking executive with a public sector bank, on the condition of anonymity as he is not authorized to talk to the media.
According to him, many banks also process such requests if they come from a premium customer that they don’t want to lose. A premium customer is someone who may have a large fixed deposit with the bank, or avails of private banking facilities, or has a business relationship.
For lenders that allow the change in EMI date, the process can be elaborate. Take the example of the procedure that Kotak Mahindra Bank has to change the EMI date for a home loan. According to the bank’s website, “The change of EMI date is subject to a credit appraisal, post which charges of ₹5,000 and broken period interest (if any) and penal charges (if applicable) or 0.5% of the loan amount plus broken period interest (if any) plus GST, whichever is less, would be applicable to process this request, if approved."
The borrower needs to resubmit post-dated cheques, ECS (electronic clearing system) mandate, along with six-month bank statement. Once the bank processes the request, the bank sends a rescheduling proposal, which the borrower must sign and submit. Most large banks follow a similar procedure.
For home and other long-term secured loans, if the bank is unwilling to change the date, one way to get it done is by approaching the bank and telling them that you want to increase the EMI amount and give them a fresh standing instruction with a new date and amount.
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