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a) He should take the holiday and come back and pay his credit
b) He should save money for at least a year and then take his
family out on their dream holiday.
Ans. B) He should save money for at least a year and
then take his family out on their dream holiday. It would
serve Ameya well to save up for at least a year before he takes the
trip. If he uses his credit card to pay for the trip he would not
only be under a lot of pressure to repay the credit card
outstanding, his credit utilization would shoot up to 75%, thereby
bringing down his CIBIL score. Ideally, credit utilization should
never exceed the range of 30-40%. This helps an individual to
maintain a good CIBIL score.
Q2) Girish is 28 years old and wants to buy his own car. But
when he applied for a car loan his car loan application got
rejected, because he has bad credit profile and CIBIL score of 680
on account of an unpaid student loan. Does the bank have the right
to reject his loan application?
Ans. A) Yes.The bank has the right to reject
Girish's application because his CIBIL score is below the
satisfactory level of 750. A common mistake youngsters are
often known make is taking the repayment of their higher education
loans lightly. If you have taken a student loan, make sure you pay
it off in full as you go on to join your first job. Your student
loan is a great opportunity to build credit and give you a head
start on a good CIBIL score, so ensure you make regular payments on
it to repay it ahead of schedule if you can.
Q3) Ashish has taken a gold loan of Rs 50,000 at the rate of 11%
and has an outstanding balance of Rs 1 lakh on his credit card
which is charging him a rate of 2.5% per annum. Which loan should
he repay first?
a) Gold loan
b) Credit card loan
Ans. B) Credit card loan.Though a 2.5% interest
rate sounds cheaper on his credit card per month, it works out to
an annual rate of interest of over 30% for Ashish. Since he is
paying a higher rate of interest on his credit card, Ashish should
pay off the outstanding amount on his credit card as soon as he
Q4) Ali has just begun his job with Rs 35,000 per month is
unable to decide what he should do first buy an individual life
insurance cover or invest in mutual funds (MFs). What should he
a) Buy insurance first
b) Buy MFs first
c) Should do both simultaneously
Ans. C) Should do both simultaneously.
Ali should asses his insurance needs first and since he does not
have any dependents, he can go in for a pure life insurance policy
like an online term plan that will work out to be cheap. He can
simultaneously invest in a MF systematic investment plan (SIP) with
as less as Rs 500 in a month which will help him inculcate
financial discipline and augment his savings in the long run.
Q5) Karunesh earns around Rs 40,000 in a month, but each month
his expenses are overshooting his income. What should he do?
a) Make a budget
b) Keep spending on his credit card
Ans. A) Make a budget. Clearly Karunesh has a
problem with his spending pattern, and the constant usage of his
credit card will get him into further debt. He should thus make a
budget and chalk out a financial plan immediately with professional
help. A professionally chalked out financial plan will help him
regulate his expenses and build up his savings.
If you have answered all five of these questions correctly, you
are indeed a financial whiz, and have your head above your
shoulders, but if your score is three and below, you need to go
back to the drawing board. Make a monthly budget to begin with and
move on to make a long term financial plan. Your job does not end
with making a financial plan. You must review it periodically and
make changes in it according to the life stage that you are in.
Maintaining financial discipline will help you maintain your
financial health and maintain a good CIBIL score too.
We, at CreditVidya, believe in empowering you. Because we believe that knowledge is not only power but also gives you a sense of belonging. We believe in supporting the consumers by not being their crutch but as catalysts and enablers.
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