Vivek Jain, 35, chartered accountant with a multinational company in Gurgaon, has never defaulted on his bills or cheques and has more or less an immaculate credit history. But banks hardly give any weight to his track record. So, Jain finds himself in the same bracket as lakhs of other borrowers.

Just like many others, the pressure of rising instalments and tenures has taken a toll on Jain’s financial focus too. He broke his Rs 1 lakh fixed deposit, his only big saving, to ensure he had enough money to take care of his monthly budget and accommodate the growing needs of a new member — daughter Avi. The joy of fatherhood brings more responsibilities as well!

To give more space to his family, Jain decided to add another floor to his house in Jaipur. Lack of funds led him to HDFC Bank’s doorstep. He took a floating rate home loan and got embroiled with rising interest rates. With the construction cost of the additional floor estimated at Rs 9 lakh, he took a loan of Rs 6.5 lakh in August 2005. At that time, the bank quoted him an interest rate of 8.75 per cent for a 20-year loan: an EMI of Rs 5,337.

 With a salary of Rs 30,000, Jain was comfortably placed then. But as rates started rising since 2006, Jain saw his bank revising his EMI subsequently. His EMI shot up significantly to Rs 6,800, a rise of Rs 1,500 or 27 per cent. It wasn’t just a rise in the EMI, but also the tenure that was tinkered. Instead of the original 20-year period, the bank increased the tenure to 28 years.

... contd.