CHEQUE BOOK

HT Estates - - HTESTATES - Harsh Roongta

I was ir­reg­u­lar in re­pay­ing my EMIs for a per­sonal loan I had taken eight years ago due to fi­nan­cial prob­lems at that time. But I had cleared the loan within the stip­u­lated time of five years and there is no out­stand­ing amount left. I have not ap­plied for any loan for the last three years. Now I need a hous­ing loan, but I’ve found that my CI­BIL score is quite low and does not meet the re­quire­ments of the bank. Can you sug­gest a way out for me? Can I ap­proach a pri­vate fi­nancer?

— Di­pankar Gupta Be­fore grant­ing you any loan, the banks will ob­tain your credit re­port from any credit in­for­ma­tion bureau, in­clud­ing CI­BIL. Your de­fault will re­flect in the re­port ob­tained and will con­tinue to stay on the credit bureau’s record for at least seven years as a re­sult of which you will face dif­fi­cul­ties in get­ting any loan or credit card even af­ter clear­ing your dues.

Whether you pay the full amount due or the agreed amount within the stip­u­lated time, your credit re­port would con­tinue to show that you had de­layed pay­ments in the past. But if you have set­tled for less than the full dues it will also show that the bank had to write off some amount. This has ad­di­tional neg­a­tive im­pli­ca­tions.

With de­lay and de­fault, your credit score is bound to be low mak­ing it very dif­fi­cult for you to get any credit fa­cil­ity from the lenders.

You can try and re­build your credit his­tory by tak­ing a se­cured credit card (se­cured against FD) or loan against tan­gi­ble mov­able se­cu­rity such as FD / jew­ellery / shares / units of mu­tual funds / life insurance pol­icy with high sur­ren­der value etc where the lender can give you a loan de­spite your ad­verse credit his­tory. By be­ing reg­u­lar in the re­pay­ments of such a loan, you will grad­u­ally im­prove your credit his­tory. This is a very slow process and it will take at least a cou­ple of years be­fore your credit his­tory gets re­paired enough for you to be el­i­gi­ble for reg­u­lar loan or credit cards. You can try ap­ply­ing to co-op­er­a­tive banks that may be will­ing to lend to you at a higher rate of in­ter­est. I have pur­chased an un­der­con­struc­tion prop­erty and ap­plied for a loan of ` 30 lakh. I was look­ing at a loan term of 15 years, but one of my friends sug­gested that it will be bet­ter if I go in for the max­i­mum ten­ure (of 25 years) and pre­pay the EMI. I was told that in­creas­ing the ten­ure will re­sult in lower EMIs and it will, in turn, give me the flex­i­bil­ity to pay in ex­cess, when­ever I can. This will re­duce the in­ter­est and prin­ci­pal. For ex­am­ple, if a 25-year ten­ure loan has ` 9,000 as EMI (`8,500 in­ter­est and ` 500 prin­ci­pal) and if I pay ` 30,000 as EMI this will re­duce the prin­ci­pal by ` 21,500 (`30,000-`8,500). Is it more ben­e­fi­cial for me to take a loan for a longer ten­ure?

— Alok Verma T h e m a x i m u m t e nu r e i s re­stricted by your age at the end of the ten­ure so as to en­sure that your loan re­pay­ment ends on or be­fore your re­tire­ment age. Even if loan el­i­gi­bil­ity is not a con­straint, you should nor­mally opt for a longer ten­ure float­ing rate loan. This way you re­tain the flex­i­bil­ity of low EMIs. You can also pre-pay the loan with­out any penalty, when­ever you have sur­plus funds, as pre­pay­ment pay­ment penalty is waived off on all home loans given un­der float­ing rate.

Since you are opt­ing for bank loan, putting ad­di­tional money in the linked ac­count is as good as pre­pay­ment. Ev­ery month when the loan in­stall­ment is paid, in­ter­est at the ap­pli­ca­ble rate is cal­cu­lated on the ag­gre­gate prin­ci­pal out­stand­ing af­ter tak­ing into ac­count the bal­ance, if any, in the linked cur­rent ac­count.

Ad­di­tion­ally, it gives you the flex­i­bil­ity to take back any por­tion of pre­pay­ment if you so de­sire. As long as you keep the ex­tra money de­posited in the ac­count, it serves your pur­pose of pre­pay­ment, be­sides help­ing you save in­ter­est cost and giv­ing you the buf­fer bal­ance. Harsh Roongta is CEO, Apna Paisa. He can be reached at ceo@ap­na­paisa.com

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