Manage credit in ‘critical’ times

If misfortune hits or your loved one is rendered critically unwell, the last thing on your mind usually is managing the finances. But to safeguard yourself and your family in the long run, it is important to manage the loan obligations of the person as these are the times when things could get out of control.

If an earning individual with loan obligations is critically unwell, it is important for the family to take stock of his/her credit commitments immediately. It is recommended that a family member immediately activate the power of attorney on behalf of the sick member and obtain his/her Credit Information Report (CIR) from a Credit Information Company (CIC) to fully understand the extent of his outstanding liabilities.

The report will provide information on active loans, credit card commitments and defaults on payments (if any). The person should immediately notify the banks about the situation and agree on mutually accepted repayments. A bank should be kept informed about such situations and is always usually willing to extend a helping hand to a person in need.

Death

In case of the death of a loved one, you should immediately submit the power of attorney or the proof of being the executor, in order to procure a CIR from a CIC. Once you receive the CIR, you need to inform the CIC about the person’s death by submitting a copy of the death certificate. The CIC will then contact the relevant lenders to ask them to update their records. Some lenders might ask you to contact them directly.

We would all like to be well organised, but our busy routine often gets in the way. It is when tragedy strikes that the real value of keeping records becomes clear. Take a few steps that can ease the process for our loved ones:

Make a clear will.

Regularly procure a CIR and keep it along with an updated list of all your financial commitments making it easier to sort things out and ensure that your lenders are made aware of any eventuality.

Arranging a power of attorney so that the person can manage your financial obligations.

Buy a credit insurance policy to cover your liabilities in case of permanent disability or death.

Be cautious of identity fraud.

Fraudsters may use the identities of dead people to apply for credit. You can reduce the chances of this happening by taking these steps:

Making sure all existing credit accounts are closed.

Returning key documents such as passport, driving license, PAN card to the organisations that issued them.

Arranging to remove the person’s name from the electoral roll (voters list).

(The writer is Managing Director, Experian Credit Information Company of India Pvt. Ltd.)

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