I am a 50-year-old self employed individual and my monthly income is Rs 30,000. My business was flourishing till last year. But of late, revenues have started to fall. I am in debt to the extent of Rs 32 lakh. Also, my home loan liability is Rs 38 lakh. My wife, aged 46, is employed and her salary after deduction towards loan repayment is Rs 7,000.
My daughter is in her final year at school.
I need Rs 30 lakh to restart the business, of which I can settle Rs 19 lakh with short term loans. I can continue my term loan of Rs 13 lakh. For future expansion I prefer taking partners.
To settle my revolving credit card monthly payments and to service other loans I am borrowing at very high interest rates. Since my track record of repayment went down in recent times, I am not eligible for loans from banks.
My current assets are a flat worth Rs 35 lakh in Chennai and jewels worth Rs 4 lakh(currently pledged). My wife’s EPF balance is Rs 50,000. A few C&F agents owe me Rs 4 lakh, which I don’t want to take back. If I restart the business, I may find it difficult to appoint fresh C&F agents.
How can I overcome my debt and save for my daughter’s education, marriage and for our retirement.
I believe my product is good and there is limited competition. Hence, I wish to continue the business with partners.
If I bring in partners, how can I protect my business interest?
— Sundar Rajan.
Financial institutions allow top-ups on home loans. If you had opted for top-up loans on your property which is similar to personal loan you could have borrowed at lower interest rates with 10 years tenure.
We suggest five options for you to consider to overcome your debt.
First, if you can identify partners, ask them to pay Rs 20 lakh for the goodwill and brand building efforts. If they don’t agree, request them to pay Rs 10 lakh and another Rs 5 lakh as soft loan and Rs 4 lakh towards dues receivable from your C&F agents. The term loan liability can be moved to the new entity.
The third option is to seek Rs 10 lakh as loan. EMI can be deducted from your salary. Then take a top-up loan from your banker for Rs 5 lakh for next 10 years.
The EMI would be Rs 7,465 for the next 10 years at 13 per cent interest. Opt for settlement of your property in favour of your wife. Ask her to raise a loan with a bank after settling her office loan. With her income, she can pay the EMI. If you opt for this strategy you can save money for your daughter’s education and marriage.
Fourth, ask for partnership of 40:30:30 and take a salary Rs 50,000 a month. Then you have no other choice other than selling your flat for Rs 35 lakh. Once you sell the house, settle all the loans barring the term loan.
The surplus would be Rs 10 lakh, some of which can be earmarked for your daughter.
Finally, if partners insist on equal partnership, ask for a higher salary. In this case you should also insist on soft loan from them to settle all your dues To protect your current surplus, buy health and term insurance policies.
(The author is CEO, Myassetsconsolidation.com)