Back in 2013, Debina Ghosh had three credit cards, one car loan and two personal loans. Recently, when she applied for a home loan, her application was "callously rejected", in her own words. So what happened between 2013 and 2017 that made Debina an ill-favoured prospect? For someone who was handling multiple credit relationships in the past, why taking a loan became a challenge? This is her story.
Debina, well past her thirties, married her long time friend, Shantanu in June 2016. Since Debina’s income was higher than Shantanu's she decided to gift her husband with a new home on their first anniversary. When her home loan was rejected, it not only dashed her plans of surprising her beloved but it was also very embarrassing for her.
She approached the bank's manager to understand what happened. The manager calmly told her that her CIBIL report showed she had defaulted on her loans in the past. And as per the bank's policy they did not give loan to CIBIL defaulters. "What do you mean? You are not the only bank. I am sure ICICI will be happy to lend to me. It's your loss, not mine” said a shocked Debina as she stormed out of the manager's cabin.
Few months down and all banks had rejected her application for the same reason. She was now desperate and disturbed. Debina asked for her credit report and saw she had a pathetic score (on her request we cannot share it here). She had indeed "settled" two credit cards out of three; she had even frequently missed paying her personal loan, one of which she eventually "settled".
All of this was correctly captured in her CIBIL report.
"I know of so many people who took loans and just ran away, never to be seen again. Yes, I settled two cards and one personal loan. I had my reasons to do so. I was concentrating on making investments at the time and didn't have enough to repay my loans. But at least I paid some of it and not eloped with their money."
"They would see what I didn't pay. Why don't they notice that I still have one credit card? That bank did not cancel my card. I paid the other personal loan in full. I paid the entire car loan, or else they would have taken my car. Why are they concentrating on the negatives than the positives? I believe I have a good track record as I have ever since paid my credit card bills on time and don’t have any other debts"
"I deserve justice". Debina was certain that banks were working as a cartel against her. She decided to write to ombudsman and RBI but in vain! When she approached us, she was almost in tears.
Beyond doubt, for Debina it had been an uphill task to take a home loan for she was a loan defaulter. She had all the intention to repay her creditors henceforth, but she wasn’t being given a chance to prove it. So does that mean there was no chance for her to fix her bad credit?
The first step in getting ahead is to accept that you have been at fault. Debina had been in denial all along citing worse examples. Know that there are no loans for bad credit for anyone. So your best chance is to work upon your credit score and improve it. Till then there are a few options to consider:
1) A Good Pay Scale: At times lenders would overlook a poor score if you have a high income. If they are convinced in your ability to repay then you may get a loan, albeit at a higher rate of interest.
2) Take A Loan at Higher Rate of Interest: Further to the above given point, some NBFCs would give a loan to those with low CIBIL score at a higher rate of interest to cover the additional risk of lending to them. It may be a costly option but it is available.
3) Get a Co-borrower with a good CIBIL score: Spouse or family member's high credit score can help your application sail through if they agree to co-borrow the loan with you.
4) Financial Institutions That Lend To CIBIL Defaulters: Approach those financial institutions that work with and lend to subprime borrowers.
5) Loan against Collateral: If you have a low CIBIL score and are struggling to get a personal loan then look no further. Plus Loans, the brand new product launched by Credit Sudhaar Finance specifically helps those with a poor credit past by giving them a second chance. Plus loan is a secured personal loan that is a loan which is given against collateral.
6) Peer to Peer Lending: P2P lending websites are bit lenient than banks that have stringent regulations. Informal sources of loan like family and friends can also be looked at.
Shantanu had a score of more than 750. We suggested that he must become the primary borrower on the home loan application, while Debina should be the co-applicant. Due to her poor score they were charged a higher interest but they got the loan. And Debina got her lesson.