Your Loan Against Property Application Denied – 8 Reasons

Setting up a business or purchasing a new house is a major milestone in the life of many. However, instead of spending your savings to meet such goals, you may consider taking a loan against property, also popularly known as a property or mortgage loan. Such a loan can be taken against one’s residential or commercial property and the borrowed money can then be used to fulfill any financial requirements.

A sizable amount with no limitation on its end-usage, affordable interest rates, and flexible repayment tenors in addition to a whole lot of other benefits, like balance transfer, tax deductions, top-up plans, and easy installments using a loan against property EMI calculator – these are the top reasons why people choose to opt for a property loan.

However, before applying for the same, you must be aware of the eligibility criteria and other terms and conditions to ensure that your property loan application does not get rejected.
Top Reasons for Loan Against Property Application Rejection

Listed below are the most common mistakes or reasons that many people overlook and end up getting their loan applications rejected by the lender.

1. Age at the time of loan application

Banks and lending institutions tend to reject loan applications depending on the borrower’s age at the time of applying for a property loan. While a newly employed individual will have a relatively low annual income, a person nearing the age of retirement may not have enough resources to pay off the loan. Thus, if the borrower is young and has just started earning or if he/she is close to retirement, lenders are often hesitant to give their approvals as they are unable to assess the borrower’s repayment capability accurately.

2. Lack of steady employment

The tenor for a loan against property extends up to 18 years, which makes it a long-term commitment. An unsteady source of income, frequent job switches, etc., are likely to affect your eligibility. That is why most lenders demand that the borrower has at least 3 years of experience working as a professional at a multinational company, private or public sector organization. The longer the period of employment, the better is your repayment capacity.

3. Low loan-to-income ratio

If you have taken a personal loan or car loan in the past, you must inform your current lender of the same. This helps them to assess your loan-to-income ratio. Keep in mind that the total loan amount should not exceed 50% of the monthly income. If your loan-to-income ratio exceeds half of your monthly salary, your loan application may get rejected. However, you may apply for it as a joint loan by incorporating your spouse’s or children’s income for it to get approved.

4. Poor credit score

Regardless of the loan type, your lender will take into account your credit report before approving the application. They will check your creditworthiness and repayment history to ascertain that you are capable and reliable of making timely payments. Ideally, a credit score of 725 and above guarantees hassle-free approvals. So make sure you maintain a good score. You can also work towards improving your credit score by never defaulting on your credit card bills and any existing loan. A high and impressive credit score can also fetch you an attractive loan against property interest rates.

5. Failure to file taxes

Regularly filing for income tax returns can prove crucial to getting your loan against property application approved or rejected. Even if your employer has not provided you Form No. 16, you must file for tax returns. Lenders do check three years’ tax records before giving the approval.

6. Unapproved or disputed property

During property verification, if the lender finds out that the pledged property is disputed or unapproved by local authorities, then your application will be rejected. Moreover, lenders are often unwilling to give approvals if the loan is used for purchasing older properties since the resale value of such properties is usually low.

7. Incomplete documentation

Any false information or discrepancy in documentation may also lead to property loan rejection. Therefore, it is essentially important that you furnish all information and documents correctly as mentioned in the application form.

8. Previously rejected loans

Apart from these, keep in mind that any previous loan application rejection can prompt the new lender to reject your current application. So avoid making the same mistakes when applying for it.
How to Apply for Loan Against Property

To apply for a mortgage loan, follow these steps:

• Fill in the online application form on the lender’s website.
• Enter your required details (personal, financial, employment and property details) in the form and submit them along with relevant documents.
• Await verification of documents and the pledges property by the lender.
• Once verified and sanctioned, expect the loan amount to be transferred to your account in 72 hours.
• Getting a loan against a property is a long procedure and you need to evaluate your loan application carefully before submission. Instead of applying hastily, it is a good idea to prepare a checklist before.

The above points can help you with the same.