Mumbai based Rishi Dewan is known to be an affable guy among his friends and loves it when his friends called him "sher-dil" or "lion hearted". Ever since the beginning of his career as a film editor Rishi has many friends with whom he goes out partying every other day. Merely 25 years of age, Rishi could not thus be happier when he got an offer to take up a credit card a year back. Soon enough, Rishi began making all transactions on his credit card, be it a shopping trip for their upcoming shoot or bowling and letting his hair down every weekend at pubs.
As Rishi drew a decent salary or ₨ 45,000 per month paying his credit card bills of ₨ 10,000-15,000 per month was not much a problem. However, he chose to pay the minimum balance on his card, as his monthly expenses exceeded his income. As he lives with his parents, Rishi hardly had any expenses other than pampering his family members occasionally and spending his money to lead a "good life". He however had the wisdom to put away 20% of his salary in insurance premiums and mutual fund investments. Things were going well until the production house that Rishi worked for said that they could not pay him a salary after a few flops in a row.
In a couple of months, the outstanding balance of his credit card shot up to ₨ 65,000 and Rishi was at a loss about how to repay his outstanding balance. He had a meagre emergency fund that could take care of his monthly expenses for about a month, but was not enough to repay his outstanding debt. Even a regular personal loan was out of question as Rishi’s credit score had dipped to 575, as he had a high outstanding balance on his credit card and was regularly making late repayments. His personal loan application thus got rejected at a private bank in which Rishi had a salary account.
Unable to figure out what was the best way out, Rishi approached his brother in law Ranjit Singh who was a financial planner by profession. After listening to Rishi’s problem carefully, Ranjit suggested that the best thing for Rishi to do under the circumstances was to opt for a personal loan against undertaking or security or a PLUS loan which is also a personal loan for low CIBIL score. Ranjit explained that though a plus loan is technically a personal loan, it is a secured loan and also helps one get a loan against the securities one holds in time of need. It is a bad credit fix especially helpful for those finding it difficult to access funding from a lending institution.
Ranjit further explained why a plus loan was the perfect personal loan with low CIBIL score. He said that a plus loan can be taken by pledging any security such as mutual fund units, demat shares, insurance policies, National Savings Certificate (NSC) or Kisan Vikas Patra (KVP), Bonds and Non-convertible debentures. When one takes a plus loan by pledging his securities an overdraft facility is advanced by the bank. The rate of interest on this type of personal loan is levied on the amount one decides to withdraw and the repayment tenure is fixed by mutual consent of the borrower and the financial institution. Usually the tenure of such loans does not exceed one year.
Since plus loans are secured loans, where the securities are considered as collateral the rate of interest on such loans are in the range of 12-15%. Ranjit helped Rishi to get a plus loan or a bad credit personal loan from state run bank at the rate of 14.75%. With a loan of ₨ 50,000 Rishi was able to repay the entire outstanding amount on his credit card that also improved credit score in one shot. Within a couple of months of taking the plus loan, things turned for the better for Rishi, as he got a new job as a production assistant with a higher pay package.
With Ranjit's advice and his own bitter experience of being unable to repay his debt, Rishi learnt his lesson and is now wiser with his spending. He still goes out with his friends, but is careful not to spend unscrupulously on his credit card. He makes small transactions on his card and ensures that he makes the payment of the entire outstanding amount within the billing cycle. He has also created an emergency fund that will take care of all his repayment obligations and expenses for two months at least and is working on expanding it. By purging his financial habits Rishi has now improved his CIBIL score considerably over the past six months and Rishi is considered quite the financial whiz among his friends now as he advises people on how to get a loan with bad credit!
Like Rishi, if you find yourself unable to access regular credit because of a bad credit score, a plus loan can come to your aid. You can clear your outstanding dues with a plus loan and stop yourself from getting sucked into a debt trap.