Ask Mint | Structured loans offer flexibility

Ask Mint | Structured loans offer flexibility

To help readers keep pace with what’s happening in the real estate sector, Mint’s Q&A will appear every other Monday.

I completed my chartered accountancy course four months ago and am now working with a reputed company. I want to take a housing loan. With great difficulty, I have managed to shortlist a good property but it is slightly beyond what I can afford. I keep reading about customized repayment options but am not sure how they work. Could you recommend a suitable option?

You have read right. There are structured repayment options available that provide flexibility to professionals such as you. Under this, the loan can be structured in such a manner that it will provide a higher loan amount as compared with what a normal salaried customer would otherwise be entitled to.

Given your background, I would suggest the step-up repayment facility, which will link the repayment schedule to your expected growth in income. You will be eligible for a higher loan amount and pay lower EMIs (equated monthly instalments) in the initial years, thus making it more comfortable for you to repay the loan.

However, it is always prudent to borrow keeping in mind your capacity to repay, and not overstretch.

Two weeks ago, I visited a property show and got a Rs10 lakh housing loan approved. However, last week I was informed that my loan has been rejected and the reason cited was two bounced cheques for my personal loan. That was around four months ago and subsequently, I have prepaid that loan as well. The reason for the bounced cheque was due to a miscommunication with the bank. How can my loan be rejected after being approved and is the reason stated valid?

The lender must have approved the loan based on the basic documents you submitted at the fair. However, it need not be equivalent to the in-depth credit appraisal lenders conduct, which not only evaluates the repayment capacity of a loan seeker but also the credit history and repayment track record. As in the developed countries, Indian lenders too have started relying on independent credit bureaus to get credit history about a loan seeker before giving the loan. The credit history would reflect all your banking transactions wherein the cheque bouncing cases will also be reflected. Therefore, it is important that one is careful with one’s repayments, and as far as possible, avoid cheques bouncing. Lenders in future would come up with options offering better terms to borrowers with excellent credit history compared with others who haven’t.

In case you have a genuine/valid reason for the cheques to bounce, it is advisable to explain the same to the loan provider; however, it is solely at their discretion to approve/reject the loan. An option to overcome such problems in the future could be having the EMIs deducted directly from your salary.

Renu Sud Karnad is joint managing director, HDFC. Readers may write in with their queries and comments to