I have a credit card bill which may take up to three months to pay. To avoid such a situation in the future, I want to cancel the card. However, the card company says I should first clear the bill. Is it better to opt for a settlement or to take a personal loan and pay off the outstanding?
Credit card debt is the most expensive. You have to pay over 40 per cent interest per annum on outstanding balance. Fresh purchases, otherwise interest free till the due date, also attract the same rate. Thus, it is important to settle all dues on the card in one shot. You have three options for doing the same: a) pay from your savings b) request the card-issuing bank to convert the dues in three equal instalments (this remains at the bank’s discretion) c) take a personal loan for the shortest possible repayment tenor.
However, remember that personal loans are not available for a three-month period and you may have to repay the loan over a minimum of 12 months. You may also consider taking a loan against gold. This type of loan may be available for a shorter period and at lower rates. If you have a fixed deposit, taking loan against it may also be a good option.
Last year, I took debt counselling. Will this affect my chances of securing a home loan? Can it result in getting the loan at a higher rate of interest?
The fact that you took assistance of a debt counselor will not have any bearing, either on your chances to get a home loan, or, on your credit history. However, your actual credit history is very important. In case there have been delays in payments or a settlement, involving write-offs, you may find it difficult to get the loan approved. This will have to be explained to the credit institution. However, once the loan is approved, I do not think you would have to pay higher interest, as risk-based pricing by credit institutions for retail loans is currently not in vogue in India.
I took a personal loan of Rs 5 lakh last year (EMI=Rs 9,000 for the past 10 months). I lost my job last month and the new one will start in two months. Hence, I may not be able to repay the loan in this period. Can I restart repaying after two months?
A delay of two months can be explained to the bank for them not to pursue you for repayments. However, this will adversely affect your credit score in the short term. If you are looking to take another loan in the immediate future, you should liquidate your investments and pay the instalments. If not, you may regularise your repayments after two months and build a good credit history thereafter.
The writer is senior vice president and group head (retail strategy and branding) at Arcil. The counselor's views expressed here are his own. You can send your queries to yourmoney@bsmail.in.