Sir
I want to invest Rs 2 lakh in a fixed deposit scheme. One of my close friends however advised me to open an FD account in a co-operative bank rather than a scheduled bank as the former generally offers 200-300 bps more than the latter. Please advise me if it is wise to open FD in a cooperative bank? Also, should I put all money in one FD or split the money into two or three FDs?
- Rajat Hari Mundyal, Jalgaon
Dear Rajat,
This is very difficult to answer. Some cooperative banks are good, some are average, and some are outright bad. It would be difficult to answer this.
We have to first understand why cooperative banks pay higher interest rates. The reason is that they charge higher interest rates from borrowers. Now the natural question is why they charge higher interest rates from borrowers or why borrowers agree to pay higher interest rates.
The reason is simple. The risk profile of those who borrow from co-operative banks is higher. This means these banks factor in a higher possibility of default by borrowers. Now if the borrowers default, banks have no means to pay the depositors. Moreover, since Government has no stake in cooperative banks, it won't come to the rescue of these banks in case of bankruptcy. In many ways it’s the same reason why solid A-rated companies offer lower interest rates on cumulative deposits than poorly managed, highly indebted companies.
Now not all the cooperative banks face problem as such. There are some cooperative banks which are run better than several scheduled banks. As to your second question, it's always a good idea to spread the risk. You can split your corpus into two or three and choose different banks to park the money.
Dear sir
I’m working at an MNC and I’m covered by a family health insurance of Rs 1.5 lakh. However, I have also bought another health insurance plan from a private insurer. I want to know if I can make a claim from both health insurance policies when the amount claimed is more than the sum assured of any one policy?
- Narender P. Chawla, Chandigarh
Dear Narender,
You can certainly claim insurance from both the health insurance companies. However, the total amount claimed should not be more than the expense incurred on treatment.
Say for example, you have two policies with a cover of Rs 1.5 lakh each and you incur a cost of Rs 2 lakh on treatment. This means one company cannot cover you for this amount. Hence you can split the claim between the two insurance companies and claim the amount. The most important thing is to let insurance companies know that you are claiming a part from other company. For this, you have to produce a certificate from one insurance company to the other one so that the remaining part can be paid.
The only problem is the hassle of added paperwork--filling multiple forms, and tracking the payments. You have to spend twice as much effort. But when it’s the matter of monies, laziness or procrastination is not an option.
Dear Sir
One of my cousins is asking me become a guarantor for a home loan of Rs 20 lakh he is borrowing from a public sector bank. He has asked me to become a guarantor because my credit history is clean. However, I’m a bit worried. What does being a guarantor actually mean? Will it affect my credit score?
- Aakash Khurana, Gurgaon
Dear Aakash,
Have you already given the guarantee? From your question, it seems you are asking if you should become guarantor and then you ask if you have done the right thing. This is confusing.
However, let me clarify the role of a guarantor. A guarantor, as the term suggests, guarantees repayment on behalf of a borrower. This means if the borrower fails to pay, the guarantor is liable to pay. I would suggest, if you haven’t done this already, check the credit history of the borrower (your cousin in this case) and decide accordingly. Going purely by the rather concerned tone of your question, it seems to me that your cousin's credit is less than reasonable. If this is the case, your decision depends on how much trust you trust him or her. Remember, its always a risk.
Dear sir
I had taken a car loan of Rs 5 lakh two years ago whose tenure is 4 years. However, I want to sell this car and buy another one while the loan repayment is still due. Please tell me how the bank would settle the final amount before I sell the car to another buyer?
- Upendra Agrawal, Agra
Dear Upendra,
Usually, banks have no issue with this as long as you repay the money you owe them. Once you find a buyer, I suggest you meet the bank representative who has financed you. Once the bank is paid from the proceeds of the sale, they would change the ownership title. If the car is sold for at least as much as your obligation, there is no problem. If the selling price is less than your obligation, you will have to meet the deficit from your pocket.
Sir
I run my own business. I pay all my credit card bills on time, taxes and have no debt obligation. However, last month, I got a shock when my home loan application was rejected by the bank. I checked with CIBIL and was happy to know a high credit score of 790. But now I’m confused over the reason behind application rejection. I contacted the bank also but didn’t get any satisfactory response. Please guide me.
- Vinay Sharma, Jabalpur
Dear Vinay,
Rejection can be for many reasons. Unfortunately, banks are not liable to answer why the loan has been rejected. If you are not getting loan from that bank, move on. There are other banks that will be more than willing to lend you with such a good credit score.
Try another bank. Moreover, it is very common that few banks reject application but the same application is accepted by many other banks. Worrying too much over reason for rejection is not worth it as long as your credit score is good and your income is enough to ensure banks about your paying capacity.