Vipul needed a quick fix. Fortunately for him, he was in a hurry to invest also and had started young. Things like compounding interest, safe investment options like FDs and some shares that did extremely well, had stocked his treasury quite generously over time. Had he sat back and given a careful thought to his finances, he could have either liquidated some of these assets for his use or taken a secure loan pledging these assets as security, instead of opting for a personal loan.
Vipul Janardhanan always did things in a hurry. He hates to pile up his task list and likes things to be out of his way and out of his head. His sense of urgency was good in a multitasking and competing with time, world. However, in most instances, about 70% of the time it was time lost because of repetitive actions owing to a lack of clarity. He took one such hasty decision, when it came to his home loan down payment, he took a personal loan for it!
He did not stop just with that one loan though. He decided to furnish his new home also with a personal loan. He now had three loans to pay up, one home loan and two personal loans, which had very high interest rates. He was managing fine for the first couple of months running a tight ship. However, everything does not happen always like a clockwork. Unexpected expenses kept cropping up and the repayments started going hay wire and defaults started mounting.
Vipul needed a quick fix. Fortunately for him, he was in a hurry to invest also and had started young. Things like compounding interest, safe investment options like FDs and some shares that did extremely well, had stocked his treasury quite generously over time. Had he sat back and given a careful thought to his finances, he could have either liquidated some of these assets for his use or taken a secure loan pledging these assets as security, instead of opting for a personal loan. Vipul did not have the patience to go through the process nor did he want to disturb his investments in any manner, as he had plans to retire early in life. Thankfully before things spiraled out of control, he tapped into these reserves.
He liquidated some of his assets, made a few bulk repayments and took care of his defaults. He also opted for a home loan transfer to refinance his current home loan. He expected the switch to benefit from the falling interest rates, to a bank that offered a better interest rate and a lesser tenure than his existing loan provider. This eased the pressure enormously as the steep interest hikes in the past were taking its toll and his bank offered the benefits of slashed interest rates, which meant lower EMIs only to new customers, which left him with a distinct disadvantage.
Vipul is not alone, there are many like him who have suffered in the process of repaying their loans.
To avoid a dilemma like Vipul, you need to choose your loan option carefully. Personal loans come with very high interest rates for shorter tenures.
Here are some of the other options you can explore instead:
a. Utilise any investments you might have made so far, like shares, securities, fixed deposits, insurance policies etc. You can pledge these as collateral and obtain a loan against them. For instance, you can obtain a loan against the surrender value of your life insurance policy from the insurance company or from a bank or obtain a loan from your provident fund account if you have had an employee provident fund account for more than 5 years. The interest rates would definitely be lower compared to the personal loan interest rates.
b. You could also obtain a Loan Against Property (LAP), by pledging property that you own. The loan amount you can avail for this loan depends on the value of the property. This can range anywhere between 1L and 3Cr. Another good thing about this loan is that you can get a longer loan tenure (can be as long as 20 years) compared to personal loan tenures, which are shorter. Though it means you will be paying interest for a longer period, these loans come with lower interest rates, which can be anywhere around 12-15% and these might be lesser in the current market conditions of falling interest rates. This will ensure that your money outflow every month will be lesser and hence will be not be a strain on your resources, allowing you to save money as well. The only downside is that this comes with the risk of giving up your property if you are unable to repay the amount in full.
Suggestions given by the Author are effective …however, stating that you can get upto 1 Crore is incorrect since Loan is sanctioned based on a repayment capacity which is 50-55% only and in extremely cases, it can be 65% of your Income
Further, customers need to provide "additional processing fees" read within quote to speed-up the processing …this processing fees if not provided, there is a delay (logic is that the customer is in need, exploit him)…this situation is not very evident in many cases yet there are such instances happening . However, there are many excellent Home Loan Agents or Advisors who provide guidance… Core issue is contacting one of those Excellent Home Loan Agents to process the Loan Application otherwise you are in likely to go merry-go-around and performa a walkton
Timely,effective article.
LAP needed valuation,legal opinion,….cumbersome & high processing fees.
give me some good idea how can i clear my loans…….. i want to final settlement
Please contact a debt counsellor…currently centres like Disha and Abhay provide these services. A search on the net will reveal their websites and their nearest location to you.
This is regarding CIBIL…will it be possible to make CIBIL to send a report as when a Banker queries a customer record …this will be an alert to the customer to find out who are all inquiring his records …..just in case to prevent misuse of proprietary data of a customer …
Can you campaign for this ?? currently, CIBIL details are known to all except the customer 🙂 …Known to All I meant to all from assistants to the Home Loan Advisor to all officers who happily share the info
Hi Arul,
The good news is you will be able to access your credit reports soon by December 2009 ( Check our article on this development – http://www.bankbazaar.com/guide/soon-you-can-trac…. RBI has made this possible in one of its recent announcements. You may also want to check this article – http://www.bankbazaar.com/guide/top-7-things-to-d… to know how to prepare for this event and take all possible precautions and efforts to improve your credit score!
Dear Sir,
This timeline is a moving timeline and there is no commitment by anyone ..
.Not sure why a formal approval is needed to share customer collated data …Do you know any valid reasons for getting a formal approval. .it is a collation of all individual entries similiar to a Bank statement ? if formal approval is needed to make these agencies to share data indicates that these CIBIL are not willing to share the proprietary data of a customer – violating fundamental right to information ….
Every Chairman of CIBIL every 3mths or every 6 mths beginning from Mr. Santhanakrishnan to the present provide news item that credit report will be accessible by the customers….however, it never reaches customers and reaches the unscrupulous people. This news item provide a good brand value for them as well as for the newspaper, magazine like Outlook Money and value website like yourself with jumps in Revenue and Sales
With memory being effervescent, all magazines , newspapers and websites happily forget it along with maze & clutter of other info and customer returns to Square one —- and with unscrupulous lenders share customer data for money consideration. This continues till another rookie journalist or rookie website reinvents and starts all over again…
That is the current status of CIBIL report …CIBIL report is in unformatted format provides incomplete information and customer is put to hardship to explain why so many entries when those entries have been closed, why many inquiries and finally why incomplete data i.e loans are closed, CIBIL report indicate open . These report are easily accessible to unscrupulous people ….
Another question why time is required till Dec2009 when this Sleeping giant CIBIL has been operational for 5 years and with technology insertion, it should take only 2 mths ….did you find out the reasons or did not attempt it to determine it …..
Will you campaign for earlier visibility or will you remind in Dec2009 that Customer can access the customer as stated by you and inform me …I shall write a Appreciation letter otherwise this is epithah for it 🙂 🙁
Thank you ….
Creditors must believe that debtors’ incomes will rise/be steady or creditors must believe that they will be able to securitize the loans they make and sell them to someone else so that whether or not the interest and capital is repaid is no longer their problem. So, it is you who is responsible for checking whether or not you can pay the debt over the time.
Next time, ensure that your EMI should not be more than half of your monthly savings left after your monthly expenses from your monthly salary. Better to have at least 60% to 70% of your new house price as down payment.
personal loans can not be given, if your total EMIs are above 50% or 65% of your monthly salary.
Coming to the pledging of assets like shares, mfs, land, house: Know all the conditions of when they will sell your assets.
I think CIBIL gives reports to whoever pays it. I think there are no free lunches.
Dear Sir:
I had applied for a home loan for a built house from India's largest bank over a month back. I have also paid the processing charges. Till date, the loan application has not moved for legal or property valuation. Over the month, the reasons given by the bank was that
1) I hadn't signed the house insurance form, 2) ID photo was not clear. 3) Copy of the agreement with the builder was missing.
After correcting / submitting these things, the latest reason for the delay is that the bank is expecting the interest rates to move up therefore they have been instructed to hold applications at the moment!
My queries are:-
– Are these delays / reasons normal and should be expected?
– From when is the rate of interest applicable? The day the application is submitted or sanctioned?
– Can I ask for the processing fee to be reimbursed if I plan to switch banks due to inordinate delay by the first bank?
– Is the bank using the delay to finely scrutinize my candidature for the loan?
– What action could I take to get the loan at the earliest without ruffling too many feathers?
– How does one get information on ones account in CIBIL?
Looking forward to your kind response and advice.
I work in gulf. Primary reason of being here is to clear my loans that had piled up over the years. I have a Housing loan of 22 lacs, top up on housing loan of 10 lacs, car loan of 2 lacs, personal loan of 2.5 lacs and I hav not invested in any fd or sharemarket so far since i did not have any spare money to do so. I want to return back to family, but the loan repayment has always been a thought that is stopping me from returning back. With an ageing mother, small kids and my wife being a housewife, is causing stress on me. Can somebody suggest a way to come out of this. We thought of selling the house, but that is the only asset i can give to my kids when they grow. Any other options ??