Every second individual you encounter is working to pay off a debt. Whether it be a home loan, a personal loan, a business loan, a student loan, or any other type of loan. Every borrower makes an effort to lessen the amount of the EMI load while doing this. Choosing secured loans over unsecured ones is one method to achieve this. In secured loans, a valuable item is used as a guarantee or collateral. By providing collateral, the lender assumes less risk. Then they can lend the money for a longer period of time or at a cheaper interest rate. A loan Against Property is one such secured loan (LAP). It is a loan secured by a property mortgage, as the name would imply.
However, sometimes your loan application may get rejected. Here are a few reasons why it might be turned down.
Why application for a LAP loan may be rejected?
The property is too old
Your property’s age is a crucial consideration. A loan may not be approved if the structure is very old. Even if you have all the necessary paperwork, the bank will still assess some factors. This includes the property’s market worth, and homes older than 25 years are typically not given the best ratings. Your tenure will be longer or the loan amount will be higher if your property is newer. Property renovations are seen favorably when applying for a loan.
No job stability
You may have received big raises and promotions from frequently changing jobs, but lenders do not really enjoy this behavior. When authorizing loans, they take into account the applicant’s employment stability. A few financial institutions even stipulate that the applicant must have worked for the same company for at least three years in order to qualify for the property loan. For lenders, stable employment means consistent revenue with a better likelihood of on-time repayments.
Rejection of previous loan application
Any loan denials in the past could make it more difficult to have one granted in the near future. A review of your credit report will reveal information about all of your prior rejected loan applications. It will negatively impact your creditworthiness and result in loan rejection.
Poor credit history
Good credit is a must for all loans, not only LAPs. It demonstrates that you have always made on-time loan payments and generally maintain a respectable amount in your account. It is a sign that you are in a good position to pay back the loan by the due date. Low-interest rates are also aided by good credit scores. Therefore, settle all existing loans and credit card debt before submitting a LAP application.
Low income is a major barrier to getting loans approved for the necessary amount, along with unpredictable occupations. Lenders won’t allow LAP if you already have other debts. They should not allocate more than 50% of your income to loan repayment.
Age criteria not met
Anyone above the age of 18 can apply for a loan. But lenders are hesitant to give them to individuals under the age of 21 and those who are getting close to 60. They worry that while recent graduates earn meager earnings, seniors nearing retirement age would soon be jobless. Additionally, financial organizations tend not to make large loans to people who have lesser incomes. You can choose a short-term house loan in these circumstances, but the EMIs will be higher.
Negative field investigation
In cases of LAP, lenders start their own verification and investigations of your property. And any discrepancy from the information provided during the application could result in an automatic rejection of the loan request. Before authorizing any loan, they look into various factors. This includes the applicant’s source of income, the market value of the property, and the relevant legal paperwork. So, when applying, don’t falsify any information.
Poor banking statements
For the purpose of determining eligibility, lenders carefully review bank statements. This is done in addition to all other legal documentation pertaining to the property. To assess the applicant’s banking behavior they examine bank accounts. They check consistent income, a sufficient balance, prompt loan repayment, investments in fixed deposits or funds, etc. You run the danger of having a loan request rejected if they are not pleased. Professionals who are salaried must provide salary statements from the last six months. While self-employed individuals must provide bank statements from the previous twelve months.
It is best to avoid making those errors. Now that you are aware of the variables that can cause a Loan Against Property application to be rejected. Lenders may not accept your home as collateral just because you own it. However, adhering to some fundamentals can raise the likelihood that your loan application will be accepted. This includes keeping a solid credit score, having a reliable source of income, etc.