Financial Reasons Might Prove Hazardous For Your Home Loan Application

Last Updated : April 5, 2016, 11:08 a.m.

You were eagerly waiting for your home loan approval letter, and you received a mail in your inbox. You opened that with eagerness and enthusiasm. The mail text stated: “Your application has been rejected.” All dreams and expectations shattered with this mail. You could have avoided this if you have paid attention to a few things in advance. There are many reasons for rejection of your application. Banks rate and evaluate your application on various parameters. If you are applying for a home loan for the first time, it is very important that you should do some background work first before applying for a home loan. When you apply for the first time, there might be many points and terms of which you might not be aware of and your application gets rejected. So, before applying for a loan and to avoid the rejection you should do some research and work upon a few things. Here, we are going to discuss some financial points, which might prove fatal for your home loan application.

1. Low CIBIL score: CIBIL score is credit history or repayment history of your previous or any present loan and credit card payment track. In case you have a lower CIBIL score and bad credit history, no bank will lend you a home loan. So, maintain a good credit history to enhance your chances of loan approval.
2. Comment on CIBIL score: Besides, the numerical score, CIBIL also have remarks and comments by lenders. Banks sometimes give you option to close or settle your loan for a slightly smaller amount to help you to clear the debt. In case, if you settle your loan in any way apart from the mentioned terms and conditions of the bank over which you agreed while borrowing the loan, there will be a remark about it in your CIBIL report. This kind of out of way settlement comments prove fatal for your loan application. If there is any comment such as ‘settled’, ‘paid after due date’ and ‘default payments’, banks take these as a warning signs and reject your application.
3. Not paying your credit card bills: Having more than one card might be a status symbol for you and many others, but having a faulty payment track of these cards is a negative point for your home loan application. If you have a habit of paying your card dues after billing dates, or you have huge dues and EMIs on your credit card, bank consider it as risk and reject your application. Make sure that you pay all your dues and payments on time to improve your CIBIL score and maintain a good credit history to increase your credit worthiness.
4. Guarantor with default loan: Having a guarantor for your loan indicates that if you fail to make payments on time or not able to pay off your loan amount your guarantor will pay the loan amount on your behalf. But, if you choose someone as a guarantor with default loan track, there are chances that your application might get rejected.
5. You are listed as defaulter: Most of the banks and financial firms maintain the record of their customers with some important details such as name, age, employment status, address, current employment and payment track of those who have defaulted on their payments. If you are in the list of defaulter, the bank will reject your application even without evaluation your application on other parameters.
6. Pre-loaded with too many financial liabilities: Every bank checks your repayment capabilities first before lending you a loan. If your salary is Rs. 50,000 and you have taken one personal loan and a car loan and also pay EMIs of your credit card and your total outgo in these are around Rs. 30,000 per month. It shows that you are left with Rs. 20,000 per month for your personal expenses. If you are staying in a rented house with all these financial liabilities, there are high chances that bank will reject your application? Your debt-to-income ratio will be higher and you don’t have enough funds to maintain a good payment track if you will be loaded with a new financial liability.
7. Tax payment history: Banks also check your credit worthiness on tax payment history as well. Most of the banks ask for the last two years or three years Form 16 or Tax payment track record from the applicant to judge their financial status.
8. Borrowing too many loan: If you have borrowed too many loans on your name in last one or two years and applied for a new loan, the bank will take you as credit hungry and reject your application. It will give an impression to bank that you are a frequent borrower and there are high risk of defaulting the payment at any point in time.
9. Too many unsecured loan: If you have borrowed many unsecured loan such as personal loan and debt on credit card, this is also taken as negative for your track. Those who have more secured loan with good credit history are always given advantage by the banks at the time of lending the loan.