To help readers keep pace with what’s happening in the real estate sector, Mint’s Q&A will appear every other Monday.
In February 2006, I took a loan of Rs21 lakh from a bank at 8.5% fixed interest for 20 years. Now I have around Rs5 lakh in hand. Please tell me if it is worth repaying the housing loan or if there is a better way to utilize my funds.
In an age of increased pressure on interest rates, a fixed interest loan at the rate of 8.5% per annum surely puts you at an advantageous position vis-à-vis a new home loan borrower.
Hence, instead of making part prepayment, you may want to consider investing the lump sum in instruments that will yield you higher returns, such as deposits, mutual funds, etc.
This would accrue dual benefits. For one, you get higher returns from your investment. And two, you could continue to enjoy tax benefits on the home loan up to Rs1 lakh under section 80C of the Income-tax Act on the principal amount paid and up to Rs1. 5 lakh under section 24 on the interest payments.
Also, by not prepaying the loan, you save on prepayment charges.
I am a home loan customer. Recently, while applying for a car loan, my loan application was rejected. The bank cited a report by Credit Information Bureau (India) Ltd (Cibil) as the reason. As per the report, I had an overdue equated monthly instalment (EMI) for the home loan against my name. However, till date, I have made all payments on time. Hence, I want to know whose responsibility it is to get the records rectified with Cibil. Please advise.
Cibil is an institution that helps Indian lenders by providing them with credit information/credit history and repayment track record of the loan seeker prior to sanctioning any kind of loan/credit instrument.
The credit history reflects all banking transactions of the individual wherein defaults, amount overdue, etc., are shown.
The records are updated by Cibil on a regular basis as the financial institutions/banks submit details to Cibil, generally on a monthly basis.
Therefore, it is extremely essential that one is careful with repayments and as far as possible, avoids defaults/late payments/cheque bouncing.
In fact, lenders in the future are likely to come up with options offering better terms to borrowers with an excellent credit history.
In response to your specific query, you could procure a document from the home loan provider stating that you have made all the EMI payments on time and have no amount outstanding, and present this to the bank where you have applied for the car loan.
Alternatively, you could write to Cibil at email@example.com, explaining your case and seeking assistance in resolving the matter.
Cibil, if satisfied, will try and resolve this by coordinating with the home loan institution, and rectify the records.
Renu Sud Karnad is joint managing director, HDFC.
Readers may write in with their queries and comments to firstname.lastname@example.org