Loan for government employees with bad credit

LOANS FOR GOVERNMENT EMPLOYEES WITH BAD CREDIT

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A STEP BY STEP GUIDE FOR OBTAINING LOAN WITH BAD CREDIT FOR GOVERNMENT EMPLOYEES

How to get loans for government employees with bad credit / Low Cibil Score/ Poor Credit in India?

If you are a Government Employee In India with bad credit, looking for a personal loan or home loan, this article will help you in obtaining a loan.

First of all, we should know the term ‘credit score’ or ‘Cibil Score’

What is CIBIL Score and how it is important in getting a Loan?

CIBIL Score is a mechanism by which every individual is categorized on the basis of his previous credit history which includes payment and default by such person. Every timely payment will increase the score and every default will decrease the score. The total number attained/scored will describe the risk involved in giving the loan to such a person.

Practical Use of Cibil Score by Banks:

Banks and Financial Institution lend money largely based upon Cibil Score. Those having Cibil score over 800+ will get a loan very easily, that too at a lower rate than others.

A person having low cibil score will not get a loan, at all from the Banks, or even if he gets it, the interest charged will be at a higher rate than the person having high Cibil Score.

LOANS FOR GOVERNMENT EMPLOYEES WITH BAD CREDIT :- Solutions for Government Employees to avail Loan if CIBIL Score is Low or No Credit History

1. Government Employees With Bad Credit Can Take Loan in spouse’s Name or Joint Loan:- A government employee/ public servant not having a credit history or a bad Cibil score will not get a Loan from a Bank at all but a Loan can be availed by applying in the name of Spouse. If the cibil score is not very bad but just on the Lower Side then the applicant can avail loan by applying jointly with spouse, if the spouse score is high or higher.

2. Government Employees With Bad Credit Can Add or introduce Guarantor (Parent/Relatives/Friends/Colleagues/Friends working in the same department/office whose credit score is Good)

In the same manner as above if the Credit score is low then the prospective loan availer/ government employee can also introduce or add Loan Guarantor to substantiate that the loan given will not be defaulted or if defaulted, the guarantor will repay the loan or it can be recovered from the Guarantor. Bank will only accept the guarantor as guarantor of the loan if he has a good Cibil score/Good Credit History.

Guarantor has to sign the loan application along with the applicant. Will have to give an indemnity bond and also will have to give consent to Bank for becoming a guarantor by signing other formal documents as and when Bank officials ask for. Do not make those persons as a guarantor who already has bad credit, they should be having a decent Cibil Score for a loan to get approved.

3. Government Employees With Bad Credit Can Approach Alternative Lending Institutions like Co-operative Banks, NBFC’s, Micro Finance Companies etc:

Several other lending institutions like Co-operative Banks and other financing companies have relaxed lending rules and policies in comparison with a Bank. The government employee with a low Cibil score is more likely to get a loan from these other institutions relatively easier than a Bank. Co-operative Banks are a best-trusted alternative with customer volume in several lakhs.

4. Government Employees With Bad Credit Can Take Loan against security:- The government employee can avail of these kinds of loans. Loan against Gratuity and Loan against provident fund is best for government employees. Even with low credit score/bad credit these loans will be granted. Like Gold Loan, Loan against LIC Policy (Whole Life/Endowment), Loan against PPF, Loan against Fixed Deposit, Loan against Mutual Fund, Loan against Share, Loan against Overdraft. – In these loans, CIBIL Sore is not considered and it helps in improving credit score.

Gold Loans are the best for getting loans. This loan is fastest among all and can be obtained in 10 to 15 minutes from almost every institution providing the same.

Valued suggestion: Sell the Gold in the open market at the prevailing rate than availing a gold loan. Taking a gold loan is an unnecessary hassle and the interest payable is also an unnecessary liability.

Q. What if I have an extra emotional attachment with my gold jewelry/article?

Persons having extra attachment towards their gold jewelry/article can take a photograph of the gold jewelry/article and sell it in the open market after which whenever the person has money he/she can go to a jeweler who can/will make the same jewelry by seeing the photograph.

The gold article is nothing but gold only, traditionally Indians have been purchasing gold, for selling the gold, whenever there is emergency/necessity instead of pledging it or taking a gold loan. Imagine paying interest on your own gold, which is an unnecessary expense/liability. Ultimately if you don’t sell your gold and take a gold loan, then it means you are paying interest not on the gold loan but for the attachment you have with the gold (emotional attachment or otherwise).

Recently Reserve Bank of India has allowed banks to give loan up to 90 percent of the total value of the gold.

Loan against Public Provident Fund is also available and provided by several banks and financial institutions.

Loan against share and mutual funds, collectively called Loan against Securities. Recently some of the Banks have started providing online loans against securities. Digital loans against securities are a new and growing phenomenon.

The author understands, practically that in the majority of the cases a person seeking loan may not be having a fixed deposit, Shares etc but there can be cases when the applicant may be having all these assets at hand and then looking for a loan like for doing side business, helping son or wife to establish or start a business etc.

5. Government Employees With Bad Credit Can Take Loans from Friends and Family:- The government employee can arrange a loan from friends and family relations and the parties can write down the terms and conditions for repayment of the loan amount. It can also be interest-free. The relatives and friends trust those friends who are in a government job and are considered simple and reputed citizens of society.

6. Departmental Loans / Government Loan Tie-ups for Salaried: Banks will offer loans to employees of reputed companies with whom the bank has corporate tie-ups. The prospective loan applicants can contact their Company HR.

7. Government Employees With Bad Credit Can Take Loans From Private Lenders / Private Financiers can be approached but their rate of interest is very high.

8. Peer to peer (P2P) lending -: An organized form of Private Lending where the money is given by private individuals to other private individuals. One Peer to another peer. No RBI Regulation so far.

9. Improve CIBIL Score:- (a) Take very small loans (b)Timely Repayment /full payment be made and not in part without default.

10. Government Employees With Bad Credit Can Approach Bank Manager/Concerned Officer of the Bank directly:-

By approaching the concerned officer the loan can be sanctioned. Usually, concerned official has some discretion to allow or reject a loan and the concerned official who is usually a bank manager can grant loan facility to some individuals using his discretionary power.

If a person willing to avail loan from a Bank has a low Cibil Score then he cannot do much about it if banking institution is discarding the person from giving loan then he can only wait for his Cibil to get improved over a period of time ( which can be a lot of time) or look for private money lenders or financiers

Money Lenders/Private Lenders/Private Financiers are there in the money lending market, who give / grant loan facilities to persons in need of money.

These money lenders lend money to people at large without any CIBIL Check, they lend money to people from all walks of life. These money lenders/private financiers will prefer to give loan to government employees over any other as government servant has job stability and regular income. Low Cibil Score or Bad Cibil Score does not bother them but they charge interest on the loan amount heavily. They are also known as loan sharks in the money lending world. They are also known to use muscle men/recovery agents in case the person who has taken the loan does not repay the interest/loan amount.

Government Employees With Bad Credit Looking for Loans should see these Parameters Of Cibil Score – CREDIT SCORE WEIGHTAGE

1) Past Performance – 30% is based on past performance which includes a history of repayment of the loan. It also includes timely payment of instalments.

2) Credit Mix and Duration – 25% of the Cibil Score is based on a credit score. This includes the ratio/mix of secured and unsecured loans an individual has taken.

3) Leverage– Leverage is also 25%. It is the ratio between the total credit limit and total the loan availed/taken.

4) Other miscellaneous reasons:-20% weightage is given to this miscellaneous reason in the calculation of CIBIL Score. If an individual has applied for 3-4 loans at different banks then his CIBIL Score will come down to the tune of 20%

Why credit score of government employees become bad or come down?

I. Default in repayment:- This could be because of genuine financial hardship. A government employee could be under suspension /or medical leave because of which they are defaults in payment of instalments.

II. Disputes with the lender on account of extra charges/ hidden charges by lender/banks: Government employees usually follow rules and regulations too strictly and even when they are right, there are disputes with bank/lending institution then govt. employee who has taken a loan tries complete settlement of the loan Account rather than repay it and because of that full and final settlement. That will bring down the CIBIL Score drastically and cibil report will reflect that the loan is settled than repaid/’Closed’. A default of 2-3 installments can bring the CIBIL Score from a respectful score of 800 to 650 or lesser.

III. Missed payment / delayed payments on credit cards:- A very big reason for credit score to become bad. Generally government servants do not miss payments because of non payment of salary, as they get timely salary dues, but they should be particular about delayed payments of credit cards.

IV. A high amount of unsecured debt/loan:- The high amount of outstanding unsecured loan like credit card dues and/or personal loans are also a reason for low credit score or in other words any bank/lending the institution will be hesitant to lend any further, especially unsecured loan.

V. Percentage of the credit limit in use:- Assuming a government an employee has a credit limit of 75 lakhs and he has already taken a loan to the tune of 70 lakhs then his ‘Leverage’ slot will come down, as a result, CIBIL will also, come down.

VI. Impact on Joint Loan Applicant/Guarantor etc:

A) Joint loan impacts the credit score of all borrowers

B) Add on credit card impacts credit score of the main credit card as well as add on cardholders.

C) Guarantor in a loan also gets a low cibil score if non –payment or default by borrower/principal borrower.

VII. Inaccurate and incorrect old information in a credit report:-Recent changes in loan account often does not get updated and still shows old status, this can also be a reason for credit score to show bad credit.

Tips to Improve Cibil Score For Government Employees With Bad Credit:-

1) Pay all loans/credit card dues in full and in time.

2) Adopt automated payment modes to pay back loans through Electronic Clearing Service( ECS) or Post Dated Cheque (PDC’s).

3) In case the Bank or institution charges any additional charge or hidden charge or wrongly charges then one can pay in time “Under Protest” and thereafter can claim a refund. That will protect your cibil score from getting low as you have already paid in time and only claimed a refund. Or claim striking out the hidden /disputed charges in time with the lender.

4) Limit your unsecured loans

5) Do not take loans in a short duration/short time.

6) Do not take too many credit cards.

7) Pay at least minimum due than default completely or full default.

8) Keep old credit cards that have good repayment history then new one which has no history or bad history. Pay them off and close them.

9) Take secured loans and pay them off timely which will improve credit score.

10) Report inaccuracy in CIBIL Report to the concerned bank or consumer disputed resolution for cibil. The mechanism is that they will cross-check with the concerned bank and it will be corrected.

11) Keep Patience- It takes 6 to 8 months for Cibil to improve and reflect in CIbil Report.

Suggestion / Points to Remember for all including government employees with bad credit or not :-

Do not take a home loan, personal loan, or any other loan from just any bank or any financial institution without complete research and market evaluation:

More than 100 recognized financial institutions and banks are available which are giving loans to Government Employees. Government employees have a larger / wider variety of choices. Ask for quotations from different banks. Government employees can choose the best /cheapest interest rate loan scheme.

Keep shopping for a better loan:- Transfer of Loan from one bank to another. Due diligence is already there. Transfer of Loans from one bank to another can be cheaper and further gets cheaper if interest rates are decreasing. Especially in the case of home loans, it can be cheaper and efficient.

The profile has changed after the loan has been taken.

Keep a check on Loan Tenure

Government employees should check the tenure of the loan in check, as they have job stability along with regular income they should look forward to repaying the loan amount earliest.

Borrow what you can repay, do not borrow unnecessarily:

Home Loan for Government employees are best for CIBIL improvement as they are considered secured loans.

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