CHEQUE BOOK

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I want to im­prove my credit score... what should I do?

—Anand Sharma First get a copy of your credit record. Study all the en­tries that show over­dues and set­tle them fully by ne­go­ti­at­ing with the con­cerned lenders/banks. If pos­si­ble get in writ­ing from the lender that any con­ces­sion given by the lender is re­ported as waived and not as writ­ten off in the re­port sent to the credit in­forma- tion bureau like CIBIL. Open small credit cards against fixed de­posits and make sure you pay them fully and on time. You can also con­sider tak­ing small gold loans or any se­cured loan against se­cu­rity of tan­gi­ble as­sets like units of mu­tual funds, in­sur­ance poli­cies with the ma­jor part from pri­vate sec­tor banks and pay­ing it off fully and on time. To im­prove your credit score, you will also need to fol­low th­ese steps: Al­ways pay your dues on credit cards or loan EMIs on time as late pay­ments are per­ceived neg­a­tively by the prospec­tive lender and af­fect your score. Use your credit cards smartly. Do not over-stretch your­self on your credit card limit. Keep it un­der con­trol. Do not por­tray your­self as a credit hun­gry cus­tomer by ap­ply­ing for too many credit cards or per­sonal loans in a short du­ra­tion. Us­ing too many credit cards can be seen neg­a­tively but limited num­ber of unused credit cards ac­tu­ally works in your favour. It por­trays you as a fi­nan­cially se­cure per­son. So, think twice be­fore dis­con­tin­u­ing your unused credit cards if you have only a cou­ple of them. Get a copy of your credit re­port on an­nual ba­sis to find out any dis­crep­an­cies re­ported in your ac­count. Any dis­crep­an­cies if no­ticed should be fol­lowed up per­sis­tently and re­solved with the con­cerned lender im­me­di­ately. I cur­rently have a home loan and con­sumer loan whose to­tal EMI is R7,000 per month. I am in­ter­ested in tak­ing an­other home loan. I am 50 years old and my monthly in­come is R54,000. What is the loan amount that I can take?

—Naresh Mit­tal Dif­fer­ent banks con­sider a cer­tain por­tion of your in­come as avail­able for pay­ment of EMI for loans. It varies from bank to bank and there is no stan­dard norm/for­mula. Usu­ally banks will as­sume around 40% to 45% of your net salary as avail­able for pay­ment of EMI to ser­vice the loans.

Hence, your ex­ist­ing loans will also have an im­pact on your loan el­i­gi­bil­ity and the lender will cal­cu­late the el­i­gi­bil­ity based on the ex­ist­ing out­stand­ing amount and the EMI be­ing paid now.

So in your case (as­sum­ing that R54,000 is your net monthly salary), the EMI avail­able to ser­vice the sec­ond home loan will be R24,300 less than the cur- rent home loan and con­sumer loan EMI.

Most banks have a max­i­mum age limit of 60 years for salaried in­di­vid­u­als since that is the re­tire­ment age. The max­i­mum ten­ure is re­stricted by the age of the bor­rower at the end of the ten­ure.

As­sum­ing your re­tire­ment age is 60, the max­i­mum loan ten­ure will be 10 years and you will be el­i­gi­ble for a home loan of ap­prox­i­mately R13 lakh at an in­ter­est rate of 10% to 10.25% per an­num. The agree­ment value of the flat will need to be at least R15 lakh.

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