What to do if you can’t get credit because of poor CIBIL score?

(Disclosure: This blog post is sponsored by Credit Sudhaar)

CIBIL score plays a crucial role in our financial lives. Most banks and financial institutions access your CIBIL report and score to do a background check and understand your credit behaviour before approving a credit application. A high score helps in winning their confidence in your ability to repay the money borrowed. Hence a good credit score increases the likelihood of getting approved for a loan. However, a low CIBIL score makes it difficult to find a willing lender. So if you have not kept up with your credit agreements or if you have high credit balances then these details get recorded in your report and screw up your CIBIL score. People view you as a risky borrower who might default in loan repayments.

If your loan application got turned down because of a bad CIBIL score do not despair. Here is what you can do to improve credit score and increase your chances of approval.

  1. Check your CIBIL report for errors– This is the first and foremost step that you should take to ensure that all the recorded data is accurate and up to date. If you find any erroneous information immediately report it to CIBIL and get it corrected.
  2. Credit repair – Bad credit score does not last forever. If you take steps to improve credit score then new positive information will certainly overshadow old negative records and help in bad credit fix. Analyse your report to identify the causes of the poor score. Is it missed or late payments, huge debt balances or over dependence on credit card that is bringing your score down? Work on the problem area, clean up your earlier defaults and start making payments on time.

Keep in mind that it will take some months before you can see improvements in your score. But if you are in urgent need of funds here are some alternative ways in which you can secure credit even with a bad credit score.

  1. Secured loan– While it is difficult to get an unsecured loan with a poor CIBIL score, it is not the case with secured loans. If you have an asset to provide sufficient security to the bank, like Gold, FD, Insurance policy or PPF then you may be able to get loan even with a bad credit score.

 

  1. Cooperative banks- You can try your luck at cooperative banks that provide small ticket loans. If you have good income and a stable job,take your monthly statements and try to gain their trust on your credibility. Show the bank that you are financially capable to repay the loan on time.

 

  1. Joint loan- If you are not able to secure a loan because of bad credit, try the route of joint loan with a family member. If they have a good credit score then applying a joint loan with them will increase your chances of approval.

 

  1. Guarantor– You can even ask a friend or family member with a good credit score to stand as a guarantor for the loan. When banks see that they can recover their investment even if the primary applicant defaults they may be willing to grant you loan even if you have a bad credit history.

 

  1. Peer to peer lending- While mainstream banks shy away from lending to people with a bad credit score there are lenders who do not follow this theoretical approach of credit assessment. The Peer to peer lending market is rapidly increasing its presence in India. Here the lenders look at the bigger picture and not just the credit score. So if you have a valid explanation of why your score went bad and why they should still trust you with their money you can stand a good chance of getting funded.

 

  1. Non-banking financial institutions-You can also have a better chance of striking a deal with NBFCs who usually have a flexible approach. Today there are lenders who may look at extending personal loan for low CIBIL score. They lend to risky borrowers but charge a higher rate of interest to compensate for the risk. If you have a genuine reason for defaulting on payments like job loss or emergency hospitalization you can expect NBFCSs to overlook your score and offer you loans.

 

There are several options to secure loan for bad credit. The only downside is that the high rate of interest at which they are available may hit your finances hard. Once you secure these loans make sure you make the payments on time and work towards building a good credit score.

 

Professional Indemnity Insurance

Here’s How to Keep Your Personal Finances Safe from Professional Mishaps

 

Professionals like doctors, engineers, architects, interior decorators and legal consultants or lawyers, chartered accountants and management consultants are looked up for their honest and dedicated service for their clients. Certain professions related to medical and law are highly respected in our country. Doctors are considered capable of saving lives in the most hazardous situations. Engineers, architects and interior decorators lay out their imaginative designs and ensure a sophisticated life for people. Similarly, lawyers fight for their clients and save them from punishment that may take up a chunk of people’s life or savings.

But, there are two sides to the same coin. Even though all these professional services are highly respected, there may be a time when these professionals may commit an error knowingly or unknowingly in their professional position. After all, no one can be 100% perfect in his or her job. There may be times when errors might be committed in professional position giving rise to unexpected civil liability towards the third-party. Such professional errors can cost a huge burden on the life and savings of their clients.

Take the recent case of the error committed by doctors in the Fortis Hospital who committed the surgery on the wrong leg of the patient. Even though these staffers were suspended in the said case, taking into account the gravity of the error, such cases do happen even in the medical field. According to a recently published study, legal proceedings accusing doctors of negligence have seen a rise of 400% in the Supreme Court. Although, only about 10%- 15% of the cases have seen doctors being found guilty, the remaining 85% medicos had to incur the cost of defending themselves.

In some cases, a doctor is sued even for a minor error. It may be that the legal liability may require him to pay a huge amount of money which he is unable to afford. He may have to part with his personal assets in such a case. There are also cases in which the doctor or the staffers are held responsible for the death of the patient. Similar cases can result in other professions like the dispute of a lawyer with his client on fees, the difference in the output of the work assured by an interior designer, any loss that the client may have suffered due to improper advice by a management consultant etc. The penalty in case of a professional mistake can be sometimes exorbitant. It may render the concerned professional helpless in the absence of an insurance policy. He may have to pay the compensation by selling off his valuable personal assets, part with his savings or terminating his services as he may not be left with suitable financial backup to run it and lose trust of his clients as well.

To protect themselves from such third-party liability, professionals can opt for the professional indemnity insurance ,also called as Errors & Omissions.

Indemnity Insurance policy covers the claim settlement out of court, compensation, court fees and other expenses arising due to any kind of error done in the professional position. It covers the insured for any error that may not involve wilful neglect and is caused by unplanned errors and omissions.

The limit of indemnity or the sum insured in this policy is fixed as a ratio between per accident and per policy period which is called Any One Accident (AOA) limit and Any One Year (AOY) limit respectively. In general cases, the Any One Accident limit is restricted to 25% of the Any One Year Limit. This is also available as a group policy which can be availed by hospitals, nursing homes, management agencies for its entire practicing staff with discounts in the premium.

Extensions can be purchased to cover overseas litigation filed by foreign clients and customers. An emergency cover can be purchased for such cases that will provide the money to you on a short notice. There is also a provision for claims in the retroactive period. This means that if a certain claim is made in the current renewed policy period due to an error that was committed in the earlier period, such a claim will be payable.

The insurance policy keeps the personal finances of a professional safe from mishaps. It is a significant policy that needs to be availed by professionals as it safeguards them from effects of their unplanned errors that may undermine their reputation, force them to discontinue their services or simply force them to part with their personal assets.

 

Things to Do When Applying For a Home Loan

(Disclosure: This blog post is sponsored by Credit Sudhaar)

Buying a house is a dream of one and all. There is certainly great demand for purchase of residences and a matching demand for home loans. In today’s age of soaring property prices, buying a property for self-consumption seems like a distant dream. Thus, hardly anyone can achieve it without seeking external financial assistance. In fact, builders include it in their sales pitch and even offer to help to find a suitable lender.

To reach one’s goal of having a home they desire, one has to get past several challenges. Monetary constraints are the biggest obstacle in their path. A lot of people have found that with the help of home loans they can steer clear of most hurdles and achieve their goals sooner than they thought. Home loans can be taken for land purchases, house purchases and for home improvements. There are home construction loans available too that help you build the house of your dreams on a plot of land you own.

Home loan is a secured form of debt. Although relatively easier to get but there are quite a few factors involved before a lender signs the dotted line on the sanction letter. Here is a checklist of things you must do before you decide to take the plunge:

  1. Creditworthiness: This factor is primarily determined through your three digit credit score and CIBIL report. Lenders do a credit check as a first step in evaluating your application. Before you apply for a home loan, seek a copy of your credit report and go through it to determine what a lender would notice in it. If you find any errors in your report then do raise a dispute to have them rectified. Work to having a better score even if you are in the 750 or more bandwidth.

 

  1. Age Factor& Tenure:People in their early 20s or 30s will find it relatively easier to get home loans rather than those in their 50s. The tenure for a standard home loan is roughly between 20 – 30 years. Thus, where an individual in their 20s can take advantage of a long tenure, thereby reducing impact of EMI and spreading the burden over a longer tenure. Whereas, a person who is, suppose 53 years old, may have to pay off the loan in a shorter tenure, for example in 10 years. Although this means that the older person would be paying little interest as compared to the younger one but the former one will have to bear a very high EMI and unless the income permits, it can be a cumbersome task.

 

  1. Economic Bracket & Job Stability: Your level of income, the nature of your job and your employer are all important factors that a lender looks into while scrutinizing your loan application. The higher your income, the less risky nature of your job, if your job is quite stable and your employer has a good track then you are likely to get a higher loan value.

 

  1. Outstanding Loans:Prior to giving a thumbs-up to your loan application, lenders like to assess your current debt burden. Since existing gross EMIs affect a borrowers repayment capacity, it is advisable that you close down on any of your currently active loans, repay them in full and make sure that you debt to income ratio is low. Don’t think you will not get a home loan for bad credit score. Rather get someone to guarantee your loan application and you will be good to go.

 

  1. Co – borrower or Guarantor:When a person who falls in the higher age bracket applies for a loan then having a younger person co-sign the loan application helps increase the chances of loan being approved. This is so because the eligibility and repayment capacity increases.

 

  1. Miscellaneous Factors: There are quite a few more factors that impact your loan evaluation process like the amount of down payment, whether the residential project is approved by the bank or not and your documentation should be authentic and complete.

 

  1. Document Checklist: In the preliminary stage of your plans to apply, make sure you have all the necessary documents ready to avoid last minute rejections of your loan. The following is a list of the main documents you will need:
  1. Complete and duly filledloan application form
  2. Identity Proof
  3. Address Proof
  4. Proof of age which can be same as identity proof
  5. Proof of income – salary slips, bank account statements, etc
  6. Proof of employment
  7. Tax returns for last three years.

All in All

A lot of people apply for home loans in the hope of owning a perfect abode for themselves. The fact that home loans offer added benefits like tax rebates is like cherry on the top. In India currently, SBI, HDFC, LIC Housing Finance, ICICI Bank and Axis bank are the key players in home finance offering competitive interest rates. There are several banking and non banking financial institutions that are willing to lend to prospective home owners. Doing a due diligence before you zero in on your pick of lender is a smart move.

Be prepared with all the documentary proofs and envision your meetings with the lender. If you have the slightest of doubts then seek help of expert credit consultants to sail through your financial dealings.

Good Luck!

Are you lending to a friend or relative?

(Disclosure: This blog post is sponsored by Credit Sudhaar)

Neither a borrower, nor a lender be!” advises an old English idiom, but what do you do if a friend or relative asks you lend money instead of opting for an easy personal loan or any other form of credit? 35 year old Mikesh Chawla found himself in a similar situation a couple of years back when his first cousin Akhilesh asked for a loan of Rs 1 lakh to aid him with his attempt at setting up his own spare parts business in Punjab. Akhilesh assured Mikesh that he had arranged for the rest of the funds and this would only be a bridge loan that he would return in a year.

Having grown up in a joint family with Akhilesh, Mikesh lent him the money in good faith though somewhere at the back of his mind he knew it was not probably the best idea as Akhilesh though enthusiastic was skittish by nature that had led to a couple of failed ventures earlier. However Mikesh let his heart prevail over his sense of logic and lent Akhilesh the money. It’s been two years hence and Akhilesh has once again lost the money as he claims he was “duped” by a supplier. With this turn of events between Akhilesh and Mikesh, relationships between them and even their fathers have gone sour.

This situation could however be avoided only if Mikesh had followed certain ground rules instead of just lending the money on the basis of an informal verbal contract. Here are certain ground rules you can follow to avoid falling into a similar situation like Mikesh.

Get full details of the plan

When you are lending money to a friend or a close relative, he will specify the reason why he needs the loan. Instead of getting a sketchy idea or an overview of what he intends to do with the money, ask for full details. For instance, Mikesh should have asked for a business plan for the spare parts business that Akhilesh proposed and gotten full details of supplier and supply chain management and should have tried to whet it on his own. If the friend or relative tends to get offended by the details or takes it personally, it should serve as a red flag to you.

Check credit profile

While you as an individual cannot access the CIBIL report of a friend or relative you can always ask him to provide you a copy of his CIBIL report. His CIBIL score and CIBIL report will give you an exact idea of how responsible the person is with his credit handling and if he has been making an attempt to improve his CIBIL score by making timely repayments. This will tell you whether he is equipped to repay the loan on time. While it may seem far-fetched and you may be accused of behaving like a bank or any other lending institution, you wouldrather take the blame of acting tough than losing the money at a later date! Mikesh for instance would have confirmed his suspicions had he gone through Akhilesh’s CIBIL report that shows that Akhileshwas onpersonal loan defaulter list earlier.

Discuss repayment terms and worst case scenario

While this is an admittedly awkward discussion to have with a close friend or relative, it is better to discuss terms of repayment, such as the principal, the interest if you wish to charge any and worst case scenarios such as late payment or non-paymentas in case of Akhilesh. You could discuss things like a late charge or even the possibility of a legal action in case of non-payment. While this may lead to some hurt feelings it will eliminate any nasty surprises later. Had Mikesh and Akhilesh had such a discussion there would perhaps not been a day like this when both families who shared almost everything do not see eye to eye today.

Get it in writing

This again may seem far-fetched when you are lending to someone close to you, but it is indeed better to keep a record in black and white rather than entering into a verbal contract. If you wish to keep things simple, have things written on a promissory note on a stamp paper and get the document notarised. Make sure that the agreement is drafted clearly and put out the clauses of repayment. It is recommended that you carry out the transaction via cheque so that it serves as a record as well. The promissory note should also bear details of this cheque. Names and address proofs too should be mentioned correctly in this agreement.

If your friend seems to be taking offence at your suggestions, and if you are even the slightest bit uncomfortable about the lender-borrower relationship consider declining the request. While these may cause anger and hurt in short term it may save your relationship in the long term as your friend ore relative may someday understand your side of the story. Be truthful about your intention and offer service based assistance if you can.

On the other hand, if you have decided to part with your money and give the loan, distance yourself and do not try to micromanage the spending pattern of your loved one. Mikesh and Akhilesh are a classic case of what not to do while lending to someone close and we hope these tips will come in handy if a similar situation arises in your life.

Edelweiss Tokio Life- CritiCare+

(Disclosure: This blog post is sponsored by Edelweiss Tokio Life)

A lot of people cover themselves with medical insurance, which only provides for hospitalization expenses when one is laid low by an illness. Equally important is the provision that you make for the loss of income and financial drain that you suffer during the recovery period.

There are some critical illnesses which put you under financial duress as you are rendered incapable to work and earn income. Some are lifelong conditions that may not allow you to get back to work at any time in the future.

Top 10 illnesses and their financial ramifications

Which are these illnesses? Here,we list down the top 10 critical illnesses that can cause financial disruption in your life:

 

  • Kidney failure requiring regular dialysis : Our kidneys are supposed to filter waste products from our body.In kidney failure, the kidneys malfunction and are unable to process the waste generated by our bodies. Dialysis is a process using which waste and excess water from the blood is removed.It is used to artificially replace the lost kidney function. For patients with chronic kidney disease, this is a lifelong process which renders the patient incapable to work any more. Generally, dialysis does not require hospitalization as it is a recurring activity. However, it renders you incapable to engage in a gainful occupation as you become very weak with the multiple dialysis sessions. Dialysis can cost anywhere between Rs.2000-3000 per session. Assuming two sessions a week, it will result in Rs.24000-25000 per month. This amount wil be burdensome especially if you are not earning.
  • Stroke resulting in permanent symptoms : Blood clots forming in the brain causing certain functions to be impaired is called as a stroke. Stroke can result in partial blindness, paralysis of limbs etc. Any kind of stroke will require a lot of time to recover during which it will not be possible for the patient to contribute productively. A stroke can result in a recovery period of anywhere between 6months to an year. If physiotherapy is involved, it will result in a cost of anywhere between Rs.5000-10000 p.m.
  • Paralysis : When a person is not able to use his limbs to full effect, it’s called paralysis. If the paralysis is partial affecting only one part of the body, it will restrict a person’s movement and prevent him for discharging his responsibilities fully. Again, physiotherapy may be neccessary for you to become capable of discharging normal functions like bathing, walking etc.
  • Cancer : Cancer is basically an abnormal growth of cells. If not diagnosed early, it may spread to all parts of the body. There are 100 types of cancer and recovery pace may depend on the kind of cancer and it’s severity. Chemotherapy is required with multiple cycles; as much as 6-8 during the lifetime of the disease. Each cycle may cost between Rs.50000-70000/- with the scans and tests costing upto Rs.1 lakh. Although, this may be covered with a medical insurance, what is not covered is the loss of income due to the treatment of cancer.
  • Brain tumours : When some cells in the brain grow in an abnormal, uncontrollable manner,  it is called as a benign tumour. Most brain tumours may need a surgery for removal, which will result in some time being lost in recovery. The surgery will definitely cost upwards of Rs.2 lakhs.
  • Burn injuries : Burn injuries are classified on the surface area that is burnt along with the severity of the same. Third degree burns are the most severe needing a longer time to recover and may also require cosmetic surgery. Although most medical insurance plans cover burn injuries, during the time taken for recovery from severe burn injuries, you may not be able to move around much and will have to definitely take time off from work resulting in loss of income
  • Total blindness : Total blindness can be debilitating and can render the affected person permanently unemployable.
  • Cardiac arrest resulting in CABG procedure: When oxygen supply is blocked to the heart due to, mainly a clot in the arteries supplying oxygen-rich blood to the heart, the person suffers a cardiac arrest. As a consequence, the affected person may need to undergo an angioplasty or an open-heart surgery to unclog the arteries.The recovery process may take anywhere between  a week to 6 months depending on the severity of the clot. Costs will vary from Rs.1.5 lac to Rs.3 lac depending on the city in which you plan to get the procedure done.
  • Motor Neurone Disease : It is a neurological disorder affecting cells that control the muscles of the body leading to weakening of the muscles.It affects the locomotive and motion abilities of the patient and can affect his productivity adversely. This is a permanent and irreversible condition and tretment involves increasing the life expectancy. The affected person will definitely lose his locomotive abilities and may never be able to engage in any gainful occupation.
  • Multiple Sclerosis : This disease disrupts the normal communication between all parts of the nervous system leading to various problems like lack of proper vision, muscle weakness ,lack of co-ordination etc.It is generally an irreversible condition and the affected person can be rendered permanently unemployable.

Conclusion

Although you may have covered yourself against the hospitalization expenses by buying a mediclaim policy, the loss of income that will be a direct result of the illness is not covered.

Cover yourself against these critical illnesses by buying a critical illness plan. It will help you with the financial support needed during your recovery phase.

One such critical illness plan is Edelweiss Tokio Life – CritiCare+ which covers 17 critical illnesses and also provides a multi claim option.