I am a guarantor for an education loan taken by my son three years back to study in the UK. Due to unavailability of jobs, he has been defaulting for the past year and a half. He plans to come back and look for a job here. Under what circumstances can a bank take action against me? What can the bank possibly do to recover the money? I am a retiree and have pension as the only source of income.
A guarantor’s responsibility co-exists with the principal borrower. Therefore, in the event of non-payment by the principal borrower, the bank will be within its rights to call upon you to pay back the loan. The bank can also simultaneously initiate all legal actions against the guarantor which are available against the principal borrower.
A bank rejected my loan because my Credit Information Bureau (India), or Cibil, score was low. I have defaulted on a credit card. Will this score change as I start clearing my debt? How frequently is this score updated?
Banks do consider the CIBIL score at the time of sanction of a fresh loan. However, the decision to sanction a loan or otherwise is the discretion of an individual bank. CIBIL scores keep changing with repayments. Banks normally submit data to CIBIL on a monthly basis, based on which the scores are worked out. In case you pay back some or all the loans, your score will undergo improvement based on the report submitted by your bank to CIBIL.
Me and My wife have a housing loan (Rs 18 lakh), a car loan (Rs 2.5 lakh), personal loans and credit card outstanding of another Rs 12 lakh. Our combined income is Rs 50,000. My wife is expecting and I will require additional money in March to take care of the hospital bills. Can you suggest a plan that can help to lower my debt obligation?
The information provided by you is inadequate, so we cannot recommend a specific solution to you. However, there are some general rules of loan management. Borrowing is not bad but it comes with a responsibility to repay. Repayments should be within one’s monthly income. High-cost loans such as credit card and personal loans should be settled first.
Try to get a low-cost loan to clear the high-cost loans. Taking the bank into confidence may be helpful, as they can also restructure the loan to reduce monthly outflow. For specific requirement of money now, first option should be to take loan from your employer, and in its absence, the only way may be to avail another personal loan. It is late to take a medical insurance now for your wife, since it may not cover the expenses for child birth now.
Sanjay Agarwal, senior vice-president & group head - retail strategy & branding of Arcil.
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