ATM :: Relocating abroad and consequences of defaulting on education loan EMIs

Mehul completed his B. Tech in computer science from a leading institute in Pune and was hired by a renowned IT company through a campus interview.
By: Harshala Chandorkar | Published: April 23, 2016 1:58 PM | The Financial Express


Profile: Mehul Kumar (name changed), aged 25 years, a software programmer with a leading IT MNC

Mehul completed his B. Tech in computer science from a leading institute in Pune and was hired by a renowned IT company through a campus interview. At 23 years Mehul had the world at his feet with a high paying job and promising career path charted out for him. After working for two years at the company’s Mumbai office, Mehul was deputed to work on a project in the Chicago office in US. Getting paid in dollars when the rupee was seeing its worst fall, Mehul decided to make most of his finances.

He decided to purchase a plush bungalow in an elite locality in his home town in Pune. While on a vacation back home, he chose the property and made an advance token payment to the builder. He then applied for a home loan at an MNC bank and was confident of express approval considering his high paying international job.

However within a few days he was informed by the bank representative that his home loan application had been rejected owing to his credit history in CIBIL. Mehul immediately accessed his credit report online from CIBIL and found that his report showed defaults on an education loan he had availed for his B. Tech course. Before leaving for Chicago, Mehul had not bothered to ensure repayment on his education loan EMIs as he did not think that not closing dues would impact him in any way. And now his careless attitude had resulted in a bad credit record which hampered his chances of availing the home loan for his dream house.

Solution: What can Mehul do now?
The first thing that Mehul must do is to repay his education loan dues and avail a ‘No Dues’ certificate from the bank. He should then gradually start building his credit history by regularly paying his credit card bills and EMIs on any other loans he may have availed. He should also keep checking his credit report regularly to assess the health of his credit history. As his credit history and credit score improves and shows no defaults and delinquencies, he can apply for the home loan again and be confident of its approval.

It is critical to understand that while moving abroad is a beautiful opportunity to develop both personally and professionally, one must never forget to payback and close the financial obligations in the home country. Before you go abroad for a longer period of time, it is good to decide what it is you want to do with your existing bank relations and financial liabilities.

One of the most important financial matters to sort at this time is credit card outstandings, loans and any debts that you may still owe. Here are a few tips to ensure that you have an immaculate credit history before you move abroad.

Pay and close all your credit card outstandings. If you decide on cancelling credit cards, ensure you receive a closing statement from the credit card company.

If you are running a home loan or any other loan, ensure that you make arrangements for regular EMI payments on this loan. Keep a track of the monthly EMI repayments and do inform your bank of your relocation and the new address.

It is equally critical to repay and close education loans, if you have availed any. Never think that it’s okay not to repay education loans. You credit report includes details of education loan as well.

Keep a track of your credit history by accessing your credit report and score regularly.

Protecting your credit history and score is critical even if you plan to leave the country and settle abroad. Remember that your credit history and score will affect almost every area of your life when conducting financial transactions. In some countries a prospective employee’s credit report is checked before recruitment. Therefore if you are moving abroad for work please ensure that you have a good credit history. You never know when you may be asked for your credit report!


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