The last few years have been testing times for us all given the volatile macro economic situation. Though we hope that things will get better, it is important to plan for the worst. Managing credit commitments when the going gets tough poses a financial challenge and presents another likely credit crossroad that we may need to understand how to handle.
Here I talk about a working professional, Mayank and the way he went about managing his existing credit commitments even though he had just been handed the pink slip.
Mayank found himself in such a situation when he lost his well-paying job with a renowned investment bank. He was married with two children and stayed in an up-market area in the city in a flat that he had bought on a home loan.
Mayank was well aware that delays in repayments would affect his credit history. This would consequently affect his ability to approach a bank for his financing needs in the future.
Banks and NBFC’s provide a record of your loan and credit card repayments to Credit Information Companies (CIC). When you apply for a loan, banks will cross check information you have provided with your credit report from a CIC to see that the information you have provided in your application is in line with the details of your credit history.
A credit report contains your past and present credit obligations, previous addresses and enquiries made by banks and NBFCs for all your loan applications. If your report shows that you repay credit on time, this will help you get credit at favourable terms.
Mayank decided to take control of his finances while he started job hunting. He started by getting a copy of his credit report from a CIC. This helped him recollect all the lenders he had existing credit obligations with and take stock of his financial obligations.
Looking at his credit liabilities, Mayank realised that it would be a struggle to keep up with his repayments. He sought the advice of a credible credit counselling agency which offers free consultation. Acting on this advice, Mayank contacted his lenders. His apprehension that the lenders will not cooperate was proven wrong. On the contrary, they were happy that Mayank had taken the initiative to keep them informed. The housing finance company official told him that many people who cannot pay their home loan EMI, could lose their home.