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5 reasons your home loan could be rejected

Last updated on: November 12, 2012 19:21 IST

5 reasons your home loan could be rejected

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Joseph Samson

Rupee Times discusses some of the uncommon reasons for rejection of your loan application.

Lenders consider a host of factors before granting any loan. The parameters and criteria to determine the eligibility and quantum of loan differs from one lender to another. Getting a loan application approved is often knowing how to keep lenders from saying 'No' to the loan. Most of the loan seekers these days are well acquainted with the rules involved to get loans and they are also aware of the reasons a bank might refuse their loan application.

It is also true that getting home loan requires today has a huge requisite list added to it before applying for the same. One need to zest up credit scores, ensure timely payment of credit card dues, close all the earlier loans and increase one's income levels. However, these are not only the reasons one might have to face a loan rejection.

Sometimes, there are certain other indirect reasons which could be causal for the rejection of the loan. Being aware of these reasons could be of help to the applicant to understand how to deal with the rejection and how to get a loan without much difficulty.

Here are few reasons for loan rejection which normally people are not aware about:

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1. Frequently switching jobs

Job hopping has become a very common trend for the current generation. Today's generation starts feeling like veterans in just one year of being associated with an organisation. However, job hopping may not be considered a virtue by banks today. Banks could simply imply it as instability in job and find it a good reason to reject the loan application.

Banks stress a lot on job stability and certain banks have even made it mandatory that the applicant needs to be employed with a particular company for three or more years to be eligible to get a loan. The banks take into consideration the stability of the company one is working for while processing a loan application.

If the company seems unstable, the lender can reject the loan application by an applicant from that company.

Constantly changing jobs might affect the credit worthiness of the applicant. So, it is highly advisable that the applicant stick to a particular job for a minimum period of a year to get the loan sanctioned.


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2. Residential address on the defaulter list

If the applicant bears the same address as someone who has been a defaulter for either loan repayment or credit card dues and which has been reported to CIBIL, chances of loan rejection increases. This is because the residential address will match with one on the defaulter's list.

In such cases, the applicant will have to discuss the issue with the relationship manager at the bank. The applicant should bring to the bankers notice that the defaulter doesn't have any direct relationship with the applicant in case of previous tenants.

And if the defaulter happens to be a family member, the applicant need to stress that the defaulter is not dependant on the applicant.


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3. Profile doesn't fit into the bank's internal policy

There are certain internal policies for every bank. For instance, if some geographic area or credit profile is listed in the banks' policy guidelines as negative for lending, the bank won't be able to sanction loans.

In such case, one need to discuss it with the bank and provide other security in the form of a guarantor or in the form of insurance policies, collateral securities, fixed deposits, etc. And one needs to assure the banker about their repayment ability.


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4. Banks do not fund for old building

A bank will not fund for old buildings especially if the building is more than 20 year old. The criteria of the age of the building vary from one bank to another. But, the land value will always be considered by the bank.

One can negotiate for a lesser loan amount by adding in some form of security and one can also increase the down payment to get the loan sanctioned.


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5. If the loan application has been rejected before

Every bank has records of the entire rejected loan applications in their database. When the applicant applies to a bank, the rejection will show up in the credit profile check and this would probably affect the credit worth of the applicant. It is highly advisable that one should not keep on applying for loans without any reason.

In case, if the previous loan rejection is other than that of default, the applicant should meet up with the credit manager explaining the reason for the rejection as the bank can reconsider its decision of rejection.

An individual planning to apply for any loan should be aware of the factors discussed above.


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