Beware of late payment to your home loan

I realize from a forum discussion that a lot of people are unaware about the consequence of missing out any single payment to their home loan can result in substancial monetary lost.

Take out the offer letter or loan agreement of your home loan, and check out the section regarding Default Interest Rate or Late Payment. It is clearly stated that in any case you fail to pay any due outstanding amount to the bank on time, the bank is entitled to charge you the "default interest rate" instead of your usual interest rate. For some banks, this change in interest rate could be permanent for all the subsequence months of your whole loan tenure period thereafter.

The so called "default interest rate" is easily a few percent above the BLR rate, and could easily makes up more than 5% difference from the interest rate that the bank used to charge you. This can end up with five to six figure of additional money payable to the bank.

Therefore, never let yourself get penalized for late payment to your home loan. This is also one of the reason why I prefer flexible home loan, whereby I can always keep some excess payment in my account which can also helps to reduce interest charges, at the same time ensure that I could always have a peace of mind that upcoming payment won't be missed as it is backup by my excess payment already sitting in the account.