Debt counselling: Sanjay Agarwal

My wife and I separated last year. She had taken an education loan, prior to our separation, with me as the guarantor. Her bank intimated me sometime back that she has defaulted on the repayment and I needed to pay her dues. I can’t do so, as I have my own debts to pay off. Can her bank inform my bank, affecting my loan adversely?
The fact of your being a guarantor has no bearing on your relationship with the borrower. As far as the lender is concerned, it merely signifies that you will honour the obligations of the borrower, in the event of his/her default in repayments. In this case, the bank is within its rights to approach you and ask for the defaulted amount that you are bound to honour. Also, credit bureaus capture information about the borrower as well as the guarantor, which affects the credit score of the guarantor. While this may not affect the existing loan of the guarantor, it will have an adverse impact on his future loan applications.

 

My father expired last month. He was servicing a home loan with equated monthly instalments (EMIs) of Rs 45,000. The total loan amount was Rs 47 lakh, of which he has repaid almost half. Can this loan be transferred to me? I cannot pay such high EMIs. Will the bank restructure the loan? How should I go about it?
In the event of death of the borrower, the liability of repayment of the loan will be transferred to the co-borrower, guarantor and legal heirs of the borrower. In most cases, the loan agreement has a clause that ‘in the event of death of the borrower, the liability of the borrower gets transferred to the successors and assigns’. Generally, either the successors pay the entire amount or the bank recovers it by selling the property. The loan gets closed in this case, since the borrower is no more.

However, if you want to pay the OEMIs, you need to get a fresh loan sanctioned either by the same bank or a different bank, settle the existing loan and get the property transferred in your name. Since it will be a new loan, there is no restructuring required and the repayment terms will be drawn afresh. I must also add here that some banks assign the same loan in favour of the heirs and transfer the property in his name, depending on their creditworthiness. So, you need to speak to your bankers, who will suggest to you about the policy that they follow.

While applying for a housing loan, I was asked if I have any other ongoing loan. I don’t have any, except some credit card dues. But the banker said credit card details were not required. Considering banks charge high interest when one defaults on his credit card payments, shouldn’t the banker have asked for the credit card details?
The entire credit history of all borrowers, including credit card repayments, is available to all lenders on account of their membership of credit bureaus. So, the bank not asking for your credit card details does not mean that it is not aware of it. A default on credit card will have an adverse impact on your credit score and, consequently, on the decision to lend. However, in India, risk-based pricing is not currently in vogue for retail lending. Therefore, while there could be an adverse impact on approval of your loan application, it is not likely to affect the pricing.

The writer is senior vice-president and group head-retail strategy and branding at Arcil. The counselor’s views expressed here are his own. Send your queries to yourmoney@bsmail.in