04 KALEIDOSCOPE ERGO Monday, May 11, 2009

Ask your query

I tried to apply for a personal loan in two banks – an MNC bank and
the other an Indian bank. Both of them rejected my applications
without any explanation. A few of my colleagues too have faced this
Choosing a
situation. I tried finding out and got to hear of something called
Sibil. What is it and why did my loan application get rejected?
Srivathsan Raghavan, Tiruvallur
Your loan could have got rejected because of a poor credit history.
CIBIL (not SIBIL) is the short for Credit Information Bureau (India)
financial
Limited. CIBIL prepares a document called Credit information report,
which is like a track record of your credit history.
“When you approach a financial institution for credit, your applica-
tion will be evaluated on the basis of your past payment history,
existing credit lines and other factors such as income and security. In
consultant
this case, a good CIR is one of the best indicators of the level of risk Keep these pointers in mind
you present to the credit grantor. A CIR that reflects a good past
payment history may lead to credit being granted on better terms. On
the other hand, a CIR, which indicates that a borrower has been
delinquent on several occasions, could lead to denial of or extremely
expensive credit” ( www.cibil.com)
To put it in simpler terms, if you have bounced cheques, delayed
payment of loans, defaulted on credit card payments, done settle-
ment on loan/credit card, your name will reflect badly on the CIR.
Even two or three instances of delayed payment or bounced cheques
could spoil your CIR and get your name on the database of CIBIL.
Once your name is in the list it takes a long time to get out of it.
(For queries on personal finance, email finergo@goergo.in with the
subject line ‘Doctor’)

Mini Quiz
Q1: FDI is
Fixed Deposits in India One-to-one interaction with your financial consultant helps
Fixed Date Interest
Foreign Direct Investment NATHIYA C highest commission. The product may not
Fully Distributed Income necessarily be the best for the client. One of
Q2: FII stands for my friend had lost 100 per cent of the Rs.1
Foreign Institutional Investor lakh in an insurance plan as first year
Spend time to understand needs
Fixed Investment Instruments charges. The plan was sold by his bank
Foreign Individual Investor Any sales person who is specialised or manager.
Fixed Income Insurance who has only products to sell – insurance Flat fees: This is a good option for the
(Send your answers to finergo@goergo.in or SMS your answers to agents, mutual fund agents, postal agents, client. The fees may be based on hourly
92813 98889. For example if you choose A as the answer to question 1 real estate brokers, etc. – will tend to say basis or case to case basis. The good thing
and B as the answer to question 2 type it as 1A2B and send it. Winner the product they sell is the panacea for all here is that the consultant will not be both-
will be chosen by lucky draw from all correct answers. Winner gets a financial problems. Beware! To my knowl- ered about the actual place where you take
Parker pen) edge no single financial product can take the product. So there will not be any con-
Answers for last week’s mini-quiz care of all needs. The reason being each of flict of interest for any financial product
Planning Commission us has needs that are very unique. This way like loans, investments, insurance, land,
Foreign Currency Non Resident understanding our needs will be the first etc.
thing that the consultant has to do. Flat Fees Plus Percentage of Actual
Funds Handled: One drawback of the flat
Word in Word Qualification and experience
Does he/she have the required licenses
fees system, i.e. on-going support is taken
care. The consultant charges flat fees and
and qualifications (CA, CFP, ACS, etc) to then a percentage of the actual financial
Max New York launches new product advice the person on the subject? I have transactions. Again conflict of interest is
met a number of people selling insurance eliminated as the consultant is not worried
Amidst all the fears gripping investors about returns of their in- through the multi-level marketing mode. I about where / whom you want to give the
vestments, Max New York Life Insurance Company has launched a would not look at these people for expert actual business to.
new product called the Max New York Life Smart Xpress, a flexible advice. Today, in India CFPCM is the high-
unit-linked insurance plan (ULIP). The product claims to offer secure est professional certification related to per- Personal comfort
returns even in times of market volatility. It offers eight fund options sonal finance. Experience adds a lot of Another important need is the personal
including the money market fund. One of the key features of this fund value. comfort that you feel with your consultant.
is to guarantee protection of NAV regardless of the date of entry, Have a one-to-one talk with the person.
switches and redirection with no exit barrier. The customer can en- Payment method Meet a number of people before you de-
sure steady and safe returns on his investments in this fund during There are three common methods that cide to start the actual work. Some of our
volatile markets as it guarantees NAV higher than the previous day ‘consultants’ charge for their services: clients don’t even discuss their salaries
and a lock-in at the highest NAV ensuring that the NAV of the fund Commission only: This is a lot risky for with their parents. But to serve them bet-
never falls. the clients, as the sales people tend to sell ter, they need to share a lot of confidential
only those products that gives them the information. Happy Financial Planning! ■