Loans have made buying easy from the smallest asset to the biggest. Everyone have a dream to own a home but due to some or the other constraint could not fulfill it. Budget stands first in this list, but now with loans availability a lot many people are able to realize their dream.
It is better to understand the common causes of loan rejection so that you can attain better chances of loan approval.
Home loans are not small transactions wherein they are big-ticket transactions that have a tenure usually ranging from 10 to 30 years.
Thus, banks and housing finance companies follow stringent approval processes for home loans. Naturally, such approval procedures often lead to rejections, so understanding common causes of loan rejection might increase your chances of loan approval.
5 common reasons for your loan rejection can be as:
- Credit score:
Credit score is something that defines your credit worth in numeric terms. It shows how efficiently you have managed your debts in the past.
Credit Score of 750 or above – GOOD
And people attaining this type of credit score usually have higher chances of loans approvals.
Mr Ratan Chaudhary (Head of Home Loans, Paisabazaar.com) said, “Those with a history of missed repayments or debt settlement have lower credit score. Lenders, too, desist from approving such home loan applicants. However, some HFCs sanction home loans to people with lower credit score, but usually at a higher rate of interest and other associated costs.”
- Your Age:
Age is another factor that hampers the chances of loan approvals. The maximum age limit for applying home loan is 60 years. The lenders always want the borrowers to repay their home loan completely by the age of 70 years. The loan rejection chances get higher for the people nearing the retirement age, with insufficient repayment capacity and incompetency to complete EMIs before age of 70.
- Job Profile of the Applicant:
Ratan Chaudhary says, “Those working with lesser-known companies or companies with poor finances have lower loan eligibility, as any adverse changes in their company’s finances may adversely affect the repayment capacity of their employees too. Those with hazardous job profile also have lower loan eligibility due to higher risk of default from death or accident.”
The job profile will always influence your home loan approval. Usually, people those who are working with government companies or top private corporations have higher loan eligibility due to their higher job certainty.
- Frequent job-switching:
A lot many job switch for the sake of higher package or improving the career prospects leads to less creditworthiness and uncertainty of job. This factor may affect the loan approval chances. So, it is advised to maintain a good record and bring stability in career.
- Being guarantor of other loans:
Being a loan guarantor you become equally liable for the complete and timely repayment of the loan. Any delay or default in repayment of loan will affect the guarantor’s credit score further reducing the probability of approval for future loans.
Hope this write up will help you in figuring out the majorly done common mistakes while filling loans applications and why most of the loans get disapprove. These points will let you get better and enhanced knowledge of the reasons for getting loan rejections.