Six Reasons Why Your Home Loan Application Can be Rejected Majority of us do not take our loan application seriously, especially if we are salaried employees with a decent monthly income. However, lenders today are extremely cautious and a stringent procedure is followed by all banks before a loan is approved and credit is disbursed by them, thanks to a 320.50 per cent increase in bad credit from 2008 to 2013. Financial institutions have a very strict procedure in place that scrutinizes all the information that is provided by potential borrowers in the loan application form. Needless to mention that even a single red flag during the scrutiny is enough for banks to reject the application. No wonder that only 40-60 per cent of the loan applications get sanctioned by banks. Following are six common reasons why banks reject loan applications: Your identity and address proof are not in place The very first step in the loan application procedure is to confirm if the potential borrower is who he says he is. For this purpose, the identity proof that you supply to bank should be accurate. Your address proof should have the address where you are residing at present. No bank would like to lend money to a customer who will not be traceable easily. If your identity and address proof are not in place, then there are very less chances of your loan getting sanctioned? How stable is your job or business All banks, before disbursing credit, want to know if the job or the business of the potential borrower is stable enough to generate a steady stream of income. Needless to mention that you must not be a job hopper (frequent) or a business man with no income tax returns (ITR) to show to the bank; if you are, then the lending institution will not consider the sanction of your loan. In either case of a job or business, ITR should have been filed by the potential buyer for the last three years. If you are an entrepreneur and if you have filed ITR showing very low profit, even then there are chances of your loan application being rejected. Have a low salary to pay EMIs If you have applied for a loan amount that cannot be justified with your present income, then the loan cannot be approved by banks; the only exception in this case sometimes is if the spouse has an income to support the household. The thumb of the rule for loan sanction is that the household should have enough income to be able to pay EMI without any default.
Already have several financial commitments In the same way, if you have a very high income, yet have several monthly financial commitments such as credit card bills, EMIs of home loan, and car loan EMI, etc., then there is a chance of your loan application being rejected in spite of high monthly salary. Are staying with a defaulter under the same roof If you have paid all your EMIs and bills on time till date, but are staying with a person who is a defaulter, then your loan application will get rejected. For example, if your brother or wife or father is a defaulter, and if you are staying with them, then the bank will reject your loan. The simple reason is that your address is in the defaulters address list, and banks have a policy to not sanction loans to anyone residing at those addresses. Your name is in the loan defaulters list The only thing that is worse than staying with a defaulter under the same roof for your loan is that you are a defaulter yourself. Every lending bank has a tie up with CIBIL which provides them with the credit history of the loan applicant. The credit history is generated on the basis of your payment patterns for credit cards and loans. Too many non-payments or delays can have an adverse effect on your credit history. On the other hand, if you do not have any credit cards or loans, then some banks check your payment pattern on mobile bills and insurance premiums paid to your service provider. Needless to mention that a credit history that is not up to the mark is likely to get your loan rejected. Above mentioned six reasons are the most common ones for loan application rejections; however, these are not the only reasons. As mentioned above, all the information provided in the loan application should be accurate, without loopholes and should meet the bank’s criteria for sanctioning the loan. Source: CommonFloor.com For Latest Updates on Real Estate Updates, Property News and Cities Infrastructure Developments Visit: http://www.commonfloor.com/guide
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