DEBT: Sanjay Agarwal

I have taken a personal loan from a bank with my father as a guarantor. I have been paying the equated monthly installment (EMI) regularly since the last one year. Due to some financial problems, I am not able to pay EMI for the next two months. I tried to negotiate with the bank to extend my loan period by two months, which they have declined. My loan is insured. What are the options for me in this case and how would it affect my father? Is there any option to restructure my loan?
For personal loans, banks do not normally reschedule/ restructure/ extend the payment period. It is advisable that you inform your bank about the possible delay and your plan to make payment for these two EMIs. Ideally, you should pay all three EMIs after two months along with the penal charges which may be levied by the bank. If you are not able to pay all three EMIs together, you may make part-payment of the outstanding two EMIs and clear all outstanding dues within next 2-3 months.

So far as loan insurance is concerned, you need to check the insurance policy for specific coverage. Loan insurance is generally available for specific covers and not for any delay in repayments. Currently, such policies are available for death and permanent disability, in which case, the insurance company may settle the entire loan depending on the insured amount. Some companies also offer insurance cover to pay installments in case the insured is either hospitalised or bed-ridden for an extended period of time.

I took a credit card 10 years back. I had willingly defaulted on it due to differences with the card issuing bank. They had refused to forgo some illegitimate charges. Will I face a problem when I go for a loan? Will Cibil reflect 10-year-old data too? In the UK, where I stayed for some years, lenders only consider defaults of last five years. In India, will the bank make a decision based on a default occurring 10 years back?
Credit bureaus maintain the loan repayment history of borrowers. Cibil is one such bureau in India. They maintain borrowers’ data for the last 7 years. While there is no single rule globally, in many countries bureaus maintain this information for preceding 4-5 years.

It is to be noted that these bureaus only provide the repayment behaviour of the borrowers to the banks and the decision to sanction loans is taken by individual banks. However, in case of defaults, it is always advisable for borrowers to speak to their bankers and arrive at a mutually acceptable solution to clear dues.

Sanjay Agarwal is senior vice-president and group head - retail strategy and branding, Arcil. The counsellor’s views expressed here are his own.

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