Debt counselling: Sanjay Agarwal

If I have not paid one equated monthly instalment (EMI) on my home loan, have I to pay a penalty the next month?

The first priority of the bank is to recover any EMI dues and they normally charge penalties at the time of loan closure, though you may pay the same earlier, too.

I applied for a car loan but it got rejected because of my low credit score. How much should the minimum score be to get a loan? How can I improve it and how long will it take?

There is strictly no minimum credit score, since credit parameters for each lending institution are different, but a low score reduces the possibility of sanction. A score is not only a function of current dues in the existing loans, but it gets affected by many other factors such as past re-payment behaviour, delays,, etc. It is, therefore, not possible to fully erase your credit history and start afresh quickly. You need to slowly start building a positive repayment record. This means regular and timely repayment of all existing dues.

Rejection of fresh loan applications lowers the score. Therefore, to build a good credit history, it is advisable to apply for secured loans with low loan-to-value ratio, like loans against fixed deposits or gold, where chances of rejection are less. Once you show disciplined repayment behaviour consistently for an extended period, it will reflect in your credit score, which will start gradually inching up.
The views expressed are expert's own. Send your queries to yourmoney@bsmail.in
Sanjay Agarwal, EVP - SME & retail business, Arcil, answers your questions