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Why was My Home Loan Application Declined?

All of us would have a doubt in mind of the approval probability when applying for a home loan. At times even if you have good income, there are chances of getting home loan rejected. The reason for this is banks judge you based on the ability to repay loan. Apart from income various other factors will be taken into consideration such as the applicant’s age, job stability, credit scoring, repayment or payment track record. All these will help in understanding the credit worthiness of the applicant. Some of the main reasons why home loan application is rejected by the lenders are:

  1. Too many Loans outstanding which is above Income/Repayment Capacity: If you are someone who is already juggling between too many outstanding loans, then there is very less chance of getting a new home loan application approved. Bank will compare your income with the repaying debt, this will bring down the availability of income to repay new loan. The real income considered while approving loan is your actual income minus (all expenses + outstanding loans repayment amount +10% savings from income).If banks figure that a new loan will make you difficult to meet expenses with available income, loan application will be reluctantly rejected by the banks or NBFCs.
  2. Bad or Poor Credit Card Payment Track Records: Those who have been accumulating credit card dues will start facing the pinch when it comes to home loan application. Your loan application will not be approved if there are lot of credit card dues and defaults. Lender will easily get access to all these information and can even check if you have defaulted payments in the past. Based on this information the banks have the right to reject the home loan application without much reasoning. Apart from credit cards, even telephone or mobile bills, insurance premium defaults will be taken into consideration by the banks and a defaulter in these will face issues during home loan application.
  3. If You are a Loan Guarantor: It is important to be extremely cautious if you are signing as a guarantor to someone. The risk of default will equally impact the guarantor. Unless you are 100% sure that the borrower will repay the loan amount, do not stand has a guarantor. Also beware of the fact that this can take a toss on your CIBIL scoring. Usually guarantor is required for huge loan amounts, this in other words mean huge risk. In case if the borrower defaults payments, the guarantor will have to clear the outstanding loan amount in order to avoid bad credit rating.
  4. If Your Residential Address is in Defaulters List: As precautionary moves make sure the residential address you are staying is free from all illegal transactions and activities. Also if you are planning to purchase a property that does not have clear titles, there is high chance of getting loan rejected by banks. Addresses of defaulters will be saved by CIBIL and a quick address check will status of loan borrower. The probability of having home loan application rejected is high in such scenarios. Though it possible to prove your innocence in this matter and get a loan approved, it might take time and you might miss out the property from your hands.
  5. If Co-applicant has Bad or Poor CIBIL Score: If you are planning to apply for a home loan with co-applicant, the income, CIBIL score, age of the co-applicant is equally important as that of yours. Banks will check the credibility of both the applicants before approving huge loans such as home loan. Having clean payment records, good income and meeting all eligibility criteria will make it easy to get a home loan approved in India.
  6. If You are a frequent Job Hopper: Consistency is very important in every aspect of life and especially when it comes to job. Being a continuous job hopper will hold you against getting a loan in India. Job hopper will have high chance of being job-less and this could affect the loan repayments. Banks will check for consistency and employer credibility before approving a home loan in India. Being employed with a reputed company and being consistent in job can help you in getting home loan at low rate of interest.
  7. If You are trying for a Joint Home Loan with Friends or Sisters: Trying for joint loan with friends and sisters is the other reason why most of the home loan applications are being rejected. None of the banks or NBFCs in India will approve a joint loan among friends or sisters. These relationships are not considered as valid for loan requirements. Joint loans are approved only between sibling (brothers), Parents and son and spouses. Others will not be considered as a good relationship for home loans. Make sure the relationship between the joint applicants is provable. Marriage certificate, birth certificates can be used as valid proof in these scenarios.
  8. Past Records of Loan Application Rejection: In case if you have applied for a loan recently and if it has been rejected, then it is wisely to take a break from re-applying for a loan immediately. Continuously applying for loans will impact your credit score and will have a drastic fall. Whether you are trying for a car loan, gold loan or simply a personal loan, the minute the application is rejected it will be recorded in your CIBIL score. All banks will check your CIBIL score and remarks of the same before approving the loan application. Continuous loan application rejection is a sign of financial insecurity of the loan applicant.

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