Getting out of a Multiple Credit Card

Is the person who has overextended credit a candidate for sympathy if he means well? He wants to pay back the outstanding amounts against his multiple credit cards, but what if he has just been fired from his job and cannot make his multiple credit card payments? Do you castigate him, telling him that he made the bed, he must lie in it? If that is so, does your lack of sympathy extend beyond the fact that recovery agents came to his house when he wasn’t at home and threatened his wife and child?

If you are the sympathetic kind (especially if you also have been in a similar jam) would you:

1. Tell the man that recovery agents are not allowed use force on borrowers or speak indecently to him or his family?
2. Tell the man that if he doesn’t want to speak to the recovery agent, the agent has to respect his wishes and withdraw?
3. Point out to him the RBI stipulation that “The bank and their agents should not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude the privacy of the debtors’ family members, referees, and friends, making threatening and anonymous calls or making false and misleading representations.“?
4. Point him to the Banking Ombudsman site www.bankingombudsman.rbi.org.in where he can lodge a complaint?
5. Point out to him that his best option would be pay off the entire amount. And then give him tips on how to do it - apply for a loan against property, stocks, insurance policy, or jewelry? But that he should try his best not to go for a settlement?
6. That there are credit counseling agencies, such as ICICI bank’s Disha, that exist for the very purpose of helping people like him?
7. All of the above
8. None of the above

Here are some credit counseling agencies:

* Abhay (Bank of India), 61 A, Sadanand, 1st Floor, Above Bank of India Branch, Gokhale Road (north), Dadar (West), Mumbai- 4000 028. Call 022-24221843.
* Disha (ICICI Bank), Prince Apartments, Ground Floor, Karani Lane, Ghatkopar (West), Mumbai 4000 028. Call 65971815/86/87. Visit www.dishfc.org
* Union Mitra (Union Bank of India), Union Bank Bhavan, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai- 400021. Call 022-22896502.

Read more...

Get help to deal with your money!

The only saving grace seems to be that I have taken no loans and I have no liability.
Otherwise I’d be stuck in a debt trap. With no way to know how to get myself out of it. Let’s just say that I am one of the “lucky” ones. What about those who are not so lucky? What can they do when in a debt trap?

One option is to go to a financial advisor or consultant. But, they can be expensive.
The better solution is to approach a credit counseling center. There are several credit counseling centers in cities across India.

Some banks also have own credit counseling centers too, such as the Bank of India-sponsored Abhay, at Dadar in Mumbai. This agency, the first of its kind, also has centers in Gumla (Jharkhand), Wardha, and Chennai.

ICICI Bank’s credit counseling centre, Disha has centers at Ahmedabad, Hyderabad, Vijayawada, Kanpur, Delhi, Chennai, and Kolkata.

These centers will help you chart out a plan to repay your debts. You can swap your high cost borrowings for low cost debt. Interest rates may be bought down to as low as 18 per cent for levels such as 36 per cent in some cases.

These centers can also help you restructure the loan portfolios and formulate repayment plans. They may also help borrowers negotiate with banks for restructuring debts.

Here are the addresses:

* Abhay (Bank of India), 61 A, Sadanand, 1st Floor, Above Bank of India Branch, Gokhale Road (north), Dadar (West), Mumbai- 4000 028. Call 022-24221843.
* Disha (ICICI Bank), Prince Apartments, Ground Floor, Karani Lane, Ghatkopar (West), Mumbai 4000 028. Call 65971815/86/87. Visit www.dishfc.org
* Union Mitra (Union Bank of India), Union Bank Bhavan, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai- 400021. Call 022-22896502.

Read more...

How do credit counselors work?

Credit counseling in India is not such a big business, though it is increasingly gaining a foot-hold in the common man’s consciousness. Sudden loss of jobs, stop on increments, over-spending on credit cards, multiple loans- a few or any of these combinations can bring you to a dead-end called the debt trap.

Before it is too late, approach your lender to make payment arrangements. If the situation is beyond repair, get in touch with a credit counselor.

There have been increasing instances of loan defaults in India recently, due to various reasons such as high interest rates, inflation, loss of job due to companies cost-cutting etc.

In India, there has been a growth in credit to household in recent years. The all-India Debt and Investment Survey 2003 estimates that nearly a fourth of the households were indebted in 2002.

When you approach a consumer credit counselor, they will try and convince the lender to decrease the rate of interest on the loan taken. That doesn’t help you decrease the loan. This means that if your outstanding loan amount is Rs. 1 lakh, this will be the amount payable, not any lesser than that.

Based on a credit counseling agency’s relationship with a particular bank, the negotiation between the debtor (you) and the creditors (bank) could be mediated to get reasonably favourable outcomes. The counselor may do a comparative study of the interest rates offered by various banks and also the terms and conditions of unsecured debt consolidation and choose the best one suitable for you.

The credit counselor also ensures that you get ample time in hand to stabilise your finances and also to pay off your debt in small installments.

But they may not be able to help you in debt consolidation.

So in a nutshell:

* A credit counselor examines ways and means to sort out the current financial crunch.
* They can help create awareness about the costs of misusing credit. This helps improve
the customer’s financial management and develop sound spending plans.

These agencies help the distressed people gain access to the structured financial system, including banking.

What do you need to check?

There are a few questions you need to get answers to before you finalise on a credit counseling agency.

• How much does the credit counseling agency charge for its services?
• Does the agency have due credentials?
• What are the services that the company can offer?
• A question you need to ask yourself. , Before you approach a consumer credit counseling service, have you read the testimonials and reviews of agencies previous or current clients as well as checked their official website?
• Is the credit counselor registered as BBB which stands for Better Business Bureau? This is a quality sign.

Read more...

In favour of a reducing balance loan

At any given point in time, an X% flat rate is always more expensive than an X% annual reducing balance rate. The effective total interest paid out is also influenced by the time periods the reducing balance is recalculated, which could be monthly, daily, yearly, quaterly or half yearly. These time periods are known as rests. At a flat rate , the interest rates are calculated keeping the outstanding amount (i.e. the amount on which interest is calculated) constant throughout the loan tenure while in a reducing balance loan the interest rate is recalculated on a periodic basis based on the reducing outstanding loan amount.

When you take a loan banks can calculate interest rates in either at a flat rate or at a reducing balance rate.

At a flat rate , the interest rates are calculated keeping the outstanding amount (i.e. the amount on which interest is calculated) constant throughout the loan tenure while in a reducing balance loan the interest rate is recalculated on a periodic basis based on the reducing outstanding loan amount.

At any given point in time, an X% flat rate is always more expensive than an X% annual reducing balance rate. The effective total interest paid out is also influenced by the time periods the reducing balance is recalculated, which could be monthly, daily, yearly, quaterly or half yearly. These time periods are known as rests.

To understand the difference in the impact between a flat rate loan amount and a reducing balance loan amount, let’s picture this. Gayathri took a 5 L loan at a flat interest rate of 12.75% and felt she had an excellent deal compared to her friend Sanjana who also took a 5 L loan around the same time at a reducing balance rate of 13%.

The truth is that the effective interest paid out by Gayathri was much higher. She paid out an EMI of 6365 every month while Sanjana paid out an EMI of 6326. The total interest paid out by Gayathri amounted to Rs. 645610 while Sanjana paid a lesser total interest of 638718.

Banks generally quote an “annualized” interest rate, but remember that interest rates can be deceptive unless you figure out how they are defined. You can easily calculate the total amount of interest that you will pay for each offer by multiplying your EMI into the number of monthly installments and subtracting the loan amount from this figure. You can then easily identify which loan is the most cost effective for you. Remember to account for any upfront fees (eg. processing fee) while comparing two loans.

In summary, the key to understanding your loan offers from multiple banks is to calculate the total amount of interest and fees you would pay for each offer and zero in on the offer that gives you the least total interest outflow.

WE ThanX to bankbazaar.com

Read more...

Checking your credit information report for inaccuracies

Pratima Mathur was feeling extremely angry. How could the bank do this to her? She was a stickler for immaculate money management skills. She never once defaulted or made a late payment for that matter even on her telephone bills.

She had maintained all her accounts with her friendly neighbourhood bank, whom she banked with in all of 15 years, since she got her first pay cheque. She had been saving up religiously for the past 10 years to accumulate enough monies to buy a car and a cozy, contemporary apartment for herself.

Once she had her down payment secured for her apartment, she zeroed in on a really neat one, which was fitted with all the up-to-date amenities. It was located at a very accessible distance to all the places she frequented be it shopping malls, hospitals, multiplexes, the beach and of course her workplace. She even got the best interest rate in the marketplace with a popular housing finance company. Everything was coming together nicely when the big blow came. The HFC called to say, they could not proceed with her loan disbursement because she had a poor credit score! Armed with reams of paperwork and credentials from her still friendly neighbourhood bank, who unfortunately did not have the kind of interest rate on the loan she wanted, she was ready to tackle the matter. After several attempts at calming Pratima’s indignation and succeeding finally, the HFC said they would be able to provide access to her Credit information Report. However, they also told her that if she wanted any clarification on the details mentioned, she should contact CIBIL and seek those clarifications.

We Thanx to
Read More bankbazaar.com

Read more...

The top 7 things to do with your credit report

Maintain and use your credit card. It serves as an excellent tool to boost a good credit score if utilised properly. However, the trick is to use it well and avoid making late payments. Things like not stretching it too close to your credit limit, regular use of the card but timely payments upfront is proof of how you manage credit lent in the short term. This will lay the foundation or provide a sample of how capable you are in managing loans long term, hence this can prove to be an asset to your credit score and help in improving your credit score.

Yes, its official now! You will be able to access your credit scores in December 2009. The score will range between 300-900, indicating the levels of default and will be available to consumers for a sum not exceeding Rs.100 as prescribed by the RBI. CIBIL, which already has a huge database of credit reports, which are currently consulted by banks before sanctioning a loan is putting up the infrastructure to be ready to service consumers who wish to access their credit reports. Isn’t that great news? Now, many of you maybe wondering how your credit report will look like, how to go about setting any mistakes in the report right, how to maximise the benefits of being able to access your credit score and other such issues. Well, look no further. Listed below are the top seven things you ought to do with your credit report.

1 . GET A COPY OF YOUR CREDIT SCORE EVERY YEAR FOR AN ANNUAL REVIEW

You should study the credit report carefully for any hidden flaws or misinterpretations. If you find anything that you feel requires a second check, do it and if still you are convinced it is indeed a flaw, then you need to address the concern immediately and escalate the issue.

2 . TAKE UP ISSUES THROUGH THE FASTER ROUTE

You need to take up issues in your credit report with the bank in question first, if for instance its a debt situation, which has already been paid and is still being recorded as a debt. The bank will then update the credit agency regarding the status and all is well. This approach is less time consuming and far better than directly contacting the credit agency. If in case the bank does not oblige you can take up the matter with the credit agency and the banking ombudsman after waiting for a period of a month, which is the standard waiting period you must provide to the bank to take necessary action.

3 . PAY YOUR BILLS ON TIME

Whether they are loans, credit card payments, insurance premiums every payment counts. If you have hassles remembering payments consider setting up an automated system with your bank to get it cleared within the due date. It is sure shot way to improve your credit score.

4 . KEEP THAT CREDIT CARD AND USE IT JUDICIOUSLY

Maintain and use your credit card. It serves as an excellent tool to boost a good credit score if utilised properly. However, the trick is to use it well and avoid making late payments. Things like not stretching it too close to your credit limit, regular use of the card but timely payments upfront is proof of how you manage credit lent in the short term. This will lay the foundation or provide a sample of how capable you are in managing loans long term, hence this can prove to be an asset to your credit score and help in improving your credit score.

5 . CREDIT TO DEBIT RATIO IS THE KEY FACTOR

As with all logic based reports, your credit report is based on the flow of credit and debt. Here the ratio between these two factors is directly related to your credit score average. For instance, if u have several outstanding debts, even if you pay them on time it would still affect your credit score as your total net worth goes down. Hence try and pay off as much debt as possible and keep them to a minimum before taking a fresh debt or loan.

6. DO NOT CLOSE YOUR CREDIT CARDS

In line with the same credit to debit ratio aspect, closing down your credit card may not help the score. Even if you do not use the credit card, it would still make sense not to to close it. If you have concerns and must absolutely close it, you may choose to do so but be aware that this also has a say in your credit score.

7 . QUICKLY ACT UPON ISSUES IN THE CREDIT REPORT

Dispute a bad credit botch always, don’t sit back and let it remain. Try solving the issue by contacting the bank and the credit bureau. If your concerns are taking time to be addressed, credit report systems that are still evolving in India might soon discover at least temporary solutions to the issue like bookmarking the issue as something under the scanner. This will protect you from being evaluated on the basis of a faulty issue in the credit report. This may help you have enough time to resolve the issue with supporting evidence regarding any false debt situations.

Read more...