Tips to avoid Home Loan Rejection
Property Hub 
Can the Location of Your Home Be the Cause of your Home Loan Rejection?
Home loans are something that most people apply for when they plan to buy a house. This is because people often do not have the luxury to buy their dream house with ready cash and in this case they have to plan a loan for home. There are times when you face home loan rejection, because of issues with the real estate builders and others because of your own credit history.
This article explains you various things to consider whenever you think of a home loan.
- Poor Credit History
- Erroneous credit reports which can also lead to home loan rejection
- Having too many Loans and little income
- Your work stability
- Loan Application been Rejected Previously
- Being a Loan Guarantor to Someone
- Things to consider while applying for home loan
- Borrow as per your capacity to pay back
- Borrow the loan for shorter tenure
- Be punctual in EMI Payments
- Interest Rates
- Replace the high cost loans
- Benefits of Availing Loan for a Salaried Person
- Your Net Salary
- Check the Eligibility Criteria
- Employment status
- Existing outstanding liabilities
- Purposes for which you can take a Personal Loan
- Always check your ability of repayment
Whenever you are planning a loan for home, you are eligible for home loan rejection if you are residing in a property which was previously occupied by a person who has defaulted on his loan. This can even happen if you rent out your house to such people. Most of the banks blacklist the defaulters along with their address where they live.
However, even if a particular address is not in the defaulters’ list, then there is a possibility that the very locality is not in the good books of the banks. In this case you tend to face home loan rejection.
Banks might deny you loan due to several other reasons. Read on to find which are they:
Poor Credit History
Your credit score should be fine enough in order to get your loan for home approved. No bank will provide a loan to someone whose record is not good. For example skipping the EMIs, delay in paying the bills, defaulting loans etc. These are all the bad indications those always would reflect and affect the credit score. So, you should always have a proper credit score in order to get your loan for home approved otherwise you will be subjected to home loan rejection.
Erroneous credit reports which can also lead to home loan rejection
If your credit score is erroneous, it can stop you from getting a personal loan sanctioned. The kind of errors could be like payments being reported wrongly, closed accounts still showing as open, false report of late payments can be the most dangerous reason for the credit score to drop. So, once you have checked your credit report for such errors, the immediate step should be to intimidate the error with credit bureau.
Having too many Loans and little income
If you have burden of too many loans i.e. if you have not closed your previous loans, then your income will be calculated from through the left amount by eliminating your ongoing credits.
If taking more than one loan would strain your income, then payment for the current loan would be difficult and hence, are liable for home loan rejection as you already owe a lot of amount. You’re more likely to be considered as a high-risk borrower.
Your work stability
The loan lender highlights this point. Certain banks insist that loan applicant has to work in any particular company for a minimum period of 3 years or more to be considered as eligible for loan. Also, if the company’s future is at stake or seem to be unstable, the lender will back out from providing loan to an applicant from that company.
Loan Application been Rejected Previously
If you face loan rejections frequently, then it is not wise to continue applying for loans and facing rejections as this gets recorded in your CIBIL score. So, the most important thing you need to do in this case is to identify the main reason behind your frequent loan rejections.
Being a Loan Guarantor to Someone
When you become a guarantor for someone, you need to be sure that the person seeking the loan is capable of paying back the loan. Never be in a hurry of signing the loan application. If the applicant by any chance fails in repaying, then it is your duty to pay the loan. If you cannot pay the loan being a guarantor then your name will be mentioned in blacklist of the CIBIL score.
Other facts to know about the home loans:
- There are various parameters which are taken into consideration while calculating your home loan eligibility. For example, age of the loan seeker, income of the applicant, credit score, financial background, loan amount and tenure of loan, CIBIL score
- Fixed vs floating rate of interest:Fixed interest rate is where you have to pay fixed EMIs while floating rate is one where rate changes along with change in market conditions.
- Loan agreementshould be read carefully before signing. Check for all the terms and conditions in detail.
- Once you take a loan for home, you have to be regular in paying the EMIs. Only after repayment of the total loan i.e. Principal and Interest over the period of time, you will become the complete owner of your house.
On the whole, banks do not reject the loan application on personal grounds but these rejections are based on poor credentials those do not match the sanction of a loan. Loans are sanctioned based on CIBIL score for credibility of the borrower, acceptable financials, repayment capacity, commensurate primary and collateral security third party guarantee etc. In case you feel that all your credentials are meritorious and bank has deliberately rejected the case, then you can always approach the bank. But remember banks never reject any loans without valid reasons as they are expected to keep a record of rejected loan applications with reasons for submission to their higher authorities.
Things to consider while applying for home loan
Home Loan is usually provided to people either by banks or NBFCs for purchasing their dream home. This payment has to be repaid to the loan lenders through monthly installments which are known as EMI.
Borrow as per your capacity to pay back
Whenever you go for a loan against property, firstly check your repaying capability. Any default in repayment will have an adverse effect on your credit score, and you will be liable to pay a penalty. Most of the banks offer 50-90 % of loan against property which is based on the market value of the property. Whenever you opt for a loan which is more than your repaying capacity, you need to pay high monthly installments. Paying high installments can eat a major portion of your income and then you and your family might have to compromise in your daily needs.
Borrow the loan for shorter tenure
Tenure of the loan is a very important factor as you have to pay your loan debts that long. Interest rates also get affected by the loan tenure you’ve selected. Always remember, a big loan for a long period may reduce the amount of monthly repayments, but the interest paid over this period is much larger than the interest on loan you borrow for short term
One can apply for loan against property with tenure of up to 15 years. This is very much tempting to opt for a lower EMI. But this way, you actually end up paying more because the interest you have paid for the last 15 years is surely more compared to the interest for a loan of shorter tenure.
Even though you cannot afford to take a loan for lower tenure, you can even ask your bank to increase the EMI amount every year in line with the increase in your salary. Even a short increase in EMI can even reduce your loan burden and can also help shorten your loan tenure.
Be punctual in EMI Payments
Not paying EMI’s on time can land you in trouble. You can be charged for it. You will be charged to pay for the penalties for irregular payments. It also affects your credit card score. Do a comparative study among all the lenders and choose the best lender for you. Extra benefits should include part prepayment, foreclosure, flexi scheme and 3 EMI free months, etc.
Interest Rates:
The interest rate for any loan against property, it is very low as compared to the interest rate of personal loan. This difference is due to the risk factor associated to both types of loans. In loan against property the rate of interest is low as the lender has less risk of losing money. You can also check and compare the interest rates through different portals online and then select the lowest interest rate possible. The loan against property interest rate is easy to repay
Replace the high cost loans
If you are willing to close your high cost loans, you can replace the higher cost loans with the cheaper ones. In order to close your costly loans as soon as possible, you can opt for loan against property. You can also seek other options like loan against life insurance policies or even against the bank deposits.
Other factors to consider
Check loan against property interest rate:
Choose a lender that will offer you a home loan at a low rate of interest. The interest rate matters a lot. The more will be the rate of
interest, the more you have to pay to the lender. You can either opt for fixed interest
rate that will be fixed for your entire tenor or floating interest rate that will keep on fluctuating with time.
Check your tenor:
If you apply for long-term loan, your EMI will be less, but in the long run you will end up paying more. However, in case of short-term loan, your EMI will be high, so it will be a matter of affordability. A secured loan is generally a
long-term loan, because you can avail tax benefits out of it.
Check the eligibility criteria:
Different lenders consider different eligibility factors. Compare and evaluate those factors to find what suits you the best.
Check other liabilities:
Think twice before applying for a new loan if you are already burdened with other debts and liabilities. Over burdening yourself with too many liabilities is not at all a good habit.
Check your credit score:
You must have a high CIBIL score above 750, to apply for loan for home.
Even though it is cost effective, the loans are reasonable and convenient to avail. Also the repayment is quite easy due to the relatively low loan against property interest rate.
Benefits of Availing Loan for a Salaried Person
The amount of loan a salaried person can get depends on the below factors. Whenever any bank or credit institution lends you a loan, you need to consider the following factors when calculating your eligibility for a loan.
Your Net Salary:
Your take-home salary after necessary deductions. It’s not always about the present, the past financial records will also have a great call on deciding whether you are eligible for a personal loan or not. When you have a good financial record, it is a plus point and it will eradicate the rating issues and hence it will also increase your total amount eligibility.
Your credit history and CIBIL score:
A minimum score of 750 is considered as good one. The lenders always check the credit score statement before lending you the money. So, before applying for the loan check for your credit scores so that you loan application does not get rejected. In case your credit card scores are not good enough, then do rectify them. So, those chances of being your personal loan getting approved are more and also you will get low interest rates personal loans.
There are some eligibility criteria to get a personal loan. As whenever you apply for an online loan, you get the loan amount within 24 hours of your application. In order to apply for a home loan online, the verification of the documents takes time as the documents are verified offline. Once you satisfy all the eligibility criteria, then it is not much difficult for people to get the loan amount for both the loans.
Check the Eligibility Criteria
Most of the banks or any other loan providers always have a particular eligibility criterion. Banks see to that the borrower is within the age group between 21 to 65 years. Another thing that the banks consider is that they verify about your minimum earning per year. The younger you are, there is more probability of getting a loan.
Employment status
Employment status is a very crucial aspect during the consideration of a personal loan. Most banks before finalizing a loan see to that the borrower has a minimum employment period of 2 years in a particular company.
The amount of loan for a salaried person also depends upon you any pre-existing loans.
Existing outstanding liabilities
This includes all open and active credit accounts such as credit cards and loans. Through a loan, you are going to get some money that will be helpful to meet the personal loans. But getting a loan but not easy to get loan. There are some procedures that you need to get by so that your loan request gets approved.
Something which one should consider after taking the loan is the repayment option. It is always a difficult task to take two loans and pay them back on time. Always remember you need to pay back the money to the bank along with the interest.
Purposes for which you can take a Personal Loan
As the name suggests, you can take personal loan for variety of reasons. The bank or any other financial institution doesn’t ask you the reason behind application of your personal loan. For example you can opt for personal loans for your wedding plans or any travel plans, to support any medical emergencies in the family, for your education or even to renovate your house.
Always check your ability of repayment
It is always good to check your repayment capability before opting a loan. Nowadays, every financial transaction that you make can be tracked. Always make sure that you go ahead with the loan amount and you can repay it every month without any delay. If you fail to pay the EMI on time it will surely affect your CIBIL score.
The EMI of your loan must not exceed to more than 30 to 40% as you also have many other expenses to meet in every month. When you already have an ongoing loan than try to accompany your existing loans with your future ones because it is only way that will help your with your life a lot. You need to also check for banks or any other financial institutions those provide you low interest rate personal loans.
