Tackle a Financial Hardship with Calm and Credit-consciousness

While we are accustomed to a certain rhythm in our daily schedules, situations like the recent COVID-19 pandemic can throw our lives into disarray, affecting our peace of mind and personal finances alike. In the last few weeks, most of us have been striking a balance between our personal and professional lives, ensuring the safety and security of our loved ones while managing our work responsibilities with equal élan.

 However, with the global economic slowdown and the recent surge in financial strains, it is critical for all of us to assess our personal finances and look for ways to optimize available resources in these uncertain times. Needless to say, this will affect our personal lives and expenses, especially if we have taken loans and find ourselves suddenly unable to fulfill our loan commitments.

 Here are a few tips that you can take to ensure you are able to manage your credit commitments and maintain a positive credit profile if you find yourself likely to land up in a financial pickle. 

• The RBI announcement on Friday, March 27, 2020 grants lenders the option to provide relaxations to borrowers on repayment of instalments for a period of 3 months for term loans, retail loans and credit cards and payment of interest under working capital loans. Opting for the moratorium will not have an impact on your credit history or CIBIL Report. It is important to remember that this is a deferred payment and the outstanding amounts and accrued interest thereon have not been waived off, so you will have to make the payments eventually. Please reach out to your lender for their individual credit policies.
• Timely payments are a critical factor in maintaining a positive credit profile, and if your monthly income has not been affected, it is important that you continue to make your credit card bill payments and EMIs on time. Alternatively, if you think you may miss a payment, reach out to your lender to discuss a moratorium period for your loan EMIs, as advised by the RBI, or any other repayment options.
• In the present scenario, your family’s well-being takes precedence over payment due dates, but here’s a tip. Reduce your credit exposure, and restrict your spend to one credit card only with a single payment due date — this can help you manage your payments better.
• A thumb rule is to pay your credit dues in full, but in case of an emergency or financial strain you may opt to pay the minimum amount payable on your credit card bill. However, it is crucial for you to remember to pay the full amount as soon as you can. (Note: This is not to be confused with the moratorium period mentioned above.)
• Consider your credit obligations carefully before you apply for any loans or credit cards in the near future. Do not increase your credit exposure and take on more loans or credit cards than you will be capable of managing or repaying, especially if you think your monthly income may take a hit.
• Monitor your CIBIL Score and Report regularly, especially now. Check your report for any indication of inaccurate information. Remember, your CIBIL Score is a reflection of your credit profile and is instrumental in getting access to credit when you need it the most. But inaccurate information can pull down your score and hamper your access to credit. You need to be credit-conscious at all times so that your credit score will not get affected.
• Budget and make a plan. Consider looking at some cuts from your daily or monthly budget if you think the situation could impact your income and/or finances.

 Remember that in trying times, we just need to stay positively calm. If you have maintained a healthy credit profile and your past payments have been sound, a one-off situation such as the moratorium announced by the RBI will not impact your overall credit profile. Continue to practice good credit behavior as much as you can. Stay credit-conscious, and stay connected to your credit profile even in the midst of a financial hardship.

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