I am 52 years. My wife (48) and my combined monthly income is Rs 1.4 lakh. I don’t have any loan outstanding, but have three credit cards (between both of us). We live in a company-provided house, which the company is willing to sell for an upfront payment of Rs 40 lakh. When I approached banks for a loan, they refused despite a clean credit history. Why should they refuse a loan? What should I do?
Banks are duty bound to give reasons for rejecting a loan, if they are asked in writing by the applicant. Once you know the reasons, you will be better placed to convince the banks about your creditworthiness. Based on the information provided by you, I don’t think it should be difficult for you to obtain a loan of up to 80 per cent of the value of the housing property, as long as the repayment tenure is within your remaining service period.
My cousin has requested me to step in as a guarantor for his son’s education loan, as his credit history is not good. What could my potential responsibilities be if I agree? And, will my credit history get impacted if he defaults on the loan?
I have mentioned in my earlier columns, too, that the responsibility of the guarantor is coterminous with that of the borrower. In the event of non-payment by the borrower, the guarantor is liable to pay. Since credit bureaus record the names of the guarantors, a good or bad repayment reflects on the credit history of the guarantor as well.
I have a huge debt burden, outstripping my income. Someone suggested approaching the Banking Codes and Standards Board of India (BCSBI) to get assistance in restructuring my debt through credit counselling services. How will that help? How much do they charge?
BCSBI provides credit counselling to retail borrowers of their member-banks whose credit exposure does not exceed Rs 50 lakh. You can fill the relevant form available on BCSBI’s website (www.bcsbi.org.in) and their counsellor will formulate a debt restructuring plan, in consultation with the bank concerned. However, it is discretionary on the part of the bank to accept the plan partially or fully. BCSBI provides these services for free.
In one of your columns, you said risk-based pricing is not offered in India. What does it mean? With a clean credit history, is there any benefit that I am being denied?
Risk-based pricing for retail loans is presently not in vogue in India for individual borrowers. It means based on the risk profile of different products — home loans, personal loans and credit card loans — each product may have different pricing applicable to borrowers. But individual borrowers are unlikely to get differential pricing for a specific product, based on their own credit history. Credit history today has a strong bearing with regard to the approval of the loan application and you get benefited by easy loan approval. Risk-based pricing for individual retail borrowers may be introduced in the banking sector in future, in which case you may also be able to draw pricing benefits.
The writer is senior vice-president and group head-retail strategy and branding, Arcil. Views expressed are his own. Send your queries to yourmoney@bsmail.in
