“Is there any rule in banking that allows them to refuse to sanction personal loans or credit cards to a relative of a lawyer or policeman whether the person is self-employed or salaried?”

“I work with an NGO, but I am finding it difficult to get a loan.”

These are some of the common queries that I come across when I talk to people.

Or, when a friend of mine approached for a loan and said that he was working with an ad agency, the bank agent politely declined the application saying “Sir, we do not offer services in your area”. So, the friend asked which areas had the service. The agent just walked away!

Though we are not aware of any such specific practices, banks may not be keen on lending loans to specific categories of lenders.

But, hearsay doesn’t really convince one of the issues that borrower community may face. A friend, Ms. Bhateja employed with a private limited company approached a private bank for a car loan. She was employed with a dotcom company and had a good pay package. Ideally, she should not have faced problems getting the loan.

Well, she could just get about 50 per cent of the cost of the car as a loan. And, being unmarried, she could not get a loan without a guarantor.

Bhateja’s mother, a teacher employed with a listed school applied for the same loan on her daughter’s behalf. She got the loan within 15 days - without a guarantor. She also got 75 per cent of the cost of the vehicle as a loan and for tenure as short as 12 months.

Well, while the borrower community may not like the idea of ‘preferred borrowers,’ it is very much there.

People working with dotcoms, private companies, or those associated with NGOs may not have a stable source of income. In fact, in a few cases, the income may fluctuate. Banks may also be wary of lending to professional such as lawyers and doctors, especially those with private practices.

By not lending a loan to a ‘weak’ borrower, the bank is saving its interests; as well as the borrower’s. Private practices can be monetarily lucrative, but whether the pattern can be sustained or not is not a risk the lender is willing to take. Keeping this in mind, the lender may offer a reduced loan amount or tenure. A loan default can spoil your creditworthiness. Worst, it can bring you face-to-face to a recovery agent.

There can also be an issue with designations. Once a borrower has given in the application, the verification is out-sourced to some credit-verification agency. More often than not, these individuals are not well-versed or exposed to the new careers, or may find it difficult to understand or converse in English. Say, a designation of Features Writer can be very ambiguous as compared to that of a Journalist.

Ms Bhateja got a call from a bank saying that she could apply for personal loan of a lakh against her credit card. Followed a rapid round and a promise that a guy from the bank would come to pick up the documents.

She got a call in the morning, “Madam, apaka designation clear nahin hai. Journalist log ko loan mein thoda problem ho sakta hai.”

No clear answers. All vague.

I had applied for a car loan in the month of October (2007) from HDFC Bank and it was approved. But, at that time, the HDFC Bank executive told me that my name shows in the defaulter’s list as Richa. One of my cousins has the same name.

When I applied for a personal loan from Barclays Bank, they rejected it, stating the same reason. I am sure my cousin never took the loan or ever used any kind of proof from my end of such a thing. What do I do?

I have been unable to get a car loan sanction from the Sate Bank of India (SBI) because of credit report in CIBIL database which showed problems in the year 2003-04.As reported to me by SBI, three sundry loans are overdue on my name. I enclosed to CIBIL, e-mails from customer care of HSBC.CITI, ICICI & ABN AMRO banks of which I used to hold credit cards. While the former three have denied any credit report sent to CIBIL against my name, ABN AMRO has requested to CIBIL for deletion of my name. CIBIL is asking for nine digit control number and expressing inability to provide me with my credit report. To the best of my knowledge, I did not hold any other card. How do I get out of this problem?

Question: Can you afford to purchase a new car?
Another question: if you can indeed afford it, how much exactly can you afford? Which, in turn, pops up another question - What can you afford to pay per month?

Okay, answers now.

The first step is to assess your personal budget and determine what you can afford a month. There are many personal budgeting guides out there that will give you an idea of how much spare money you have each month. As a general rule of thumb, you should track every paisa you spend over a period of at least a month. This will help determine where you really spend your money and how much you can afford. Take into consideration all basic necessities and set aside a certain portion for contingencies. You might be actually surprised to learn exactly where your money is going each month. And make slight adjustments to your spending patterns to ensure that you have a respectable amount that you can set aside.

Now work backwards from here.
Let’s assume that you can afford to pay Rs.10000 a month for that new car. Taking into calculation current interest rates offered on car loans, you can now calculate how much you can borrow.

If you can afford an EMI of Rs.10000, at an interest rate of 14% per annum for a 60-month loan, you are eligible for a loan of Rs. 4.29 lakh approximately.

You now know your upper limit for the car loan. If your EMI outlay per month is around 30-40% of your net take-home pay, you are home and dry. You can have that car and the cost will not play havoc with your monthly budget.

The above tips will help you to get an idea of the new car that you can afford. Loan amounts disbursed are totally at the discretion of the lender. If you have good credit history, lenders could finance 100% of the car cost. Typically, you need to put up 10-15% of the cost of the car. In the above-mentioned scenario that would work to around Rs. 75000. Add this to the loan amount and the car you can afford is really over Rs. 5 lakh!

The author is a Relationship Manager working with the Mumbai-based SRE Financial Planners.