Home loan is an instant way to get cash and fulfill financial liabilities such as marriage of a son/daughter, their studies, your much awaited vacation, etc. However there are certain eligibility criteria’s, requirements, paperwork, and formalities that a new loan applicant has to conform to for an easy home loan approval. It is naturally very difficult for the person to get all the things right initially while he/she apply for a home loan. So we have dug deeper into the matter and have put together the list of easily avoidable issues faced by rejected home loan applications.
The top 5 reasons for Home Loan application rejection include:-
- If your home address is in the bank’s loan defaulters list
If you stay at a residence that is on the defaulters list of the bank, there is a high probability of your loan application being rejected. In India, every bank or financial institution has a separate list of defaulters in their database. This means if you live in a house of someone who has earlier skipped paying the loan debts or credit cards dues, you will have to deal with the poor circumstances and constant rejection in your loan application.
- If you have huge pending debts
No bank or lending institution will approve your home loan application, if you already have long standing pending dues accumulated through credit cards, late EMI payments and pending debts. You can overcome this issue by paying up and then applying for a new loan. Also you need to make sure that the CIBIL updates your data before you apply for a loan as poor CIBIL score also leads to home loan application rejection.
- If you have many outstanding dues
You home loan application will also be rejected if you are already juggling with too many debts. This is because, too many debt means more EMIs & the higher ongoing credit repayments and less income in hand. So if another loan will make it difficult for you to repay effectively, then your loan will be rejected.
- If you are a guarantor of a defaulter
You might not even thing twice while becoming someone’s loan guarantor, but this could hamper your loan approval chances significantly if he/she turns out to be a loan defaulter. Thus to avoid getting into such a scenario, it is always good to think twice before becoming someone’s loan guarantor. If they fail to pay the debt, you might have to repay the loan on their behalf or maybe end up getting your housing loan application rejection.
- If you are in the age of retirement
You loan application can also be rejected if you are nearing retirement age. This is mainly because at your older age you will have no repayment capacity after a few years. However there are few banks that may lend you short term loans up to your date of retirement but that would be of no use as huge loan amount will lead to higher EMIs that would overburden you. Hence, banks are most likely to reject housing loan application in such a scenario.
In addition to the above mentioned factors, your housing loan application may also get rejected in case you don’t file your income tax regularly, you have a poor credit score, your loan application has been rejected before or if you are a job hopper. In sufficient funds, inadequate deposits, any sign of instability are other significant factors that may lead to loan application rejection.
Banks reject home loan applications for a variety of reasons that not every customer can navigate. But keeping a tab on the aforementioned factors can significantly help you in your home loan approval. You must also make sure that all your finances are in order before applying for a home loan in any of the bank or financial institution.