I have a few personal loans. But due to a crisis in the family, I may not be able to service one of the personal loans for four-five months. I am expecting a fresh source of fund after that. What costs am I likely to incur due to a default?
We would advise you not to wilfully default on your loan. It would be more prudent to liquidate some of your fixed assets, such as gold, shares or fixed deposits to take care of your emergency fund requirements. Every loan and credit card transaction is tracked by the Credit Information Bureau (India) Ltd and a default will affect your credit rating, which can make your chances of getting another loan slim. Also, banks do not take kindly to defaults and will consistently follow up on the delay, which can be very stressful for you. If you think you have no way out, notify the bank authorities about the emergency.
Adhil Shetty, CEO & co-founder, BankBazaar.com
A public sector bank charges around 1-2% of the instalment if it remains unpaid for 30 days after the due date. In case you have given post-dated cheques for the payments and your account has insufficient funds, you may have to pay cheque-bouncing charges, which can be Rs250-400. In case you have opted for an ECS (electronic clearing service) payment, you may have to pay Rs100-150 if funds are insufficient. Also, note that these charges will add on with every month’s delay and the final penalty that you need to shell out will be hefty.
In the future, whenever you decide to apply for a loan, plan your repayment in such a manner that it accounts for all other financial commitments. Also, keep instalments for at least three months handy for any emergency.
I want to take a loan for a small car. What all should I consider?
Arvind, you seem to have made up your mind on a small car, which is good. Next would be your research on which small car would ideally suit you. This year there is a slew of small car launches from some of the best brands. You may want to wait before deciding on a car. Otherwise, visit nearby car dealerships and test-drive the available cars. Check for cash discounts and other benefits, too. Also, find out which bank is giving you the best interest rate. Try and make a larger down payment to ensure your loan liability reduces. Opt for a popular model as it is likely to offer discounts and other benefits. Make sure your loan covers the on-road price of the car, including registration, insurance, road tax and other costs.
How do I decide whether a petrol car is good or a diesel car?
This depends on your needs. A diesel car will be more expensive than a petrol car, so you need to decide if the extra expense will be worth it. A simple way to figure out is to determine how much you would use your car. Is your workplace far from home and you want to use your car to reach there? Would you make frequent outstation trips? If you think your usage will be really high, then opt for a diesel car as the cost saved in buying a petrol car will be negated by your fuel expenses.
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Adhil Shetty is CEO & co-founder, BankBazaar.com