Debt Counselling: Sanjay Agarwal

Thanks to a medical emergency, I had to use my credit cards to pay the bills. Both my cards have almost reached their credit limit. I do not have funds to pay the card bills. The medical insurance covers the expenses but hasn’t come through as yet. Is there anything I can do to avoid the high interest charges and let my credit rating be unaffected?
To avoid paying high interest rates without affecting your credit bureau score, you will have to settle the complete amount for both the cards before the next due date. You may use your savings to pay this amount or take a personal or gold loan. These loans may be settled once you get your insurance claim. It will be advisable for you to compare the interest rates for both the loans, as also the processing fee and prepayment charges, in case you wish to completely pay the loans off on getting the insurance claim. Considering the short-term nature of funds required and the involvement of processing fee and prepayment charges, you may have to do a quick calculation of the total expense involved in making partial payment for cards and taking fresh loans.

Another option can be taking a loan against your fixed deposits, which provides the lowest rate, flexibility while repaying and has no extra charges.

I have never taken a loan before and recently applied for a personal loan of Rs 5 lakh. However, the bank refused the same, saying I have a bad credit history. I could not get more details from the bank, but a friend of mine suggested it could be because I have too many credit cards. I have six cards, but have not defaulted on payments. Could the number of cards be the reason for the rejection of my loan?
The number of credit cards held by a person cannot be the reason for rejection of his/her loan application. While you say you have never defaulted on your payments, at times errors creep into the credit bureau records. It is, therefore, recommended that you first get your credit history and score from Cibil to find out your exact credit history. You could visit their website and see the credit report made available to the bank. In case of any error, you should contact Cibil as well as the card-issuing banks to rectify the same.

Second, banks are duty bound to provide the reason for declining any loan application, which you should ask from the bank in writing. Here, I must add that banks do not decide on credit sanction only on the basis of bureau records. They have their own criteria as well. Once you get the bank’s reply, you will be better placed to address their concerns or apply for a loan from some other bank.

The writer is senior vice president and group head (retail strategy and branding) at Arcil. The views expressed are his own. You can send your queries to yourmoney@bsmail.in