Things to Do If Your Loan Against Property Application Gets Rejected

A property loan is a big financial commitment that fetches you, large funds through the mortgage of your existing property, provided you match the lender’s eligibility parameters and other related requirements. When you decide to take up a Loan Against Property, you need to do your due diligence in setting your affairs in order. But it may so happen that despite your best efforts and planning, your loan application is rejected. Read on to know what you should do in such instances.   

What Should You Do If Your Lender Rejects Your Property Loan Application?

Lenders may reject LAP applications for various reasons such as poor credit history and credit score, insufficient income, improper documentation and more. Hence, you should check with the lender and find out why your application was denied. You can also discuss ways to fix it with probable alternatives.

Once the problem has been identified, you can take corrective steps to remedy it before applying for a loan again. For instance, if your credit score is low, you can try to enhance it first before approaching a lender in the future. Or, if you have the wrong debt-to-income ratio (DTI), you should pay off your existing debts to have adequate fund reserves for availing a Loan Against Property. You may also shop around for other property loans to see if you can find a lender with more flexible norms.

Read Also: How to Increase Your CIBIL Score Above 800 

Reasons That Play a Vital Role in Loan Against Property Rejection

The criteria that establish eligibility for a loan, supporting documentation and the sanctioned amount may differ from lender to lender. If you do not fulfil certain pre-conditions, your Loan Against Property application may be denied. Generally, to improve your chances of securing a LAP, you should maintain a good credit score, pay credit card dues promptly, enhance your income levels and clear all previous loans. 

Given below is an overview of some of the reasons for a Loan Against Property rejection such as:

Previous Loan Application Refusal

Lenders normally maintain a list of loan applications rejected in the past. Further, they run stringent checks to examine the credit history and repayment capacity of each loan applicant. If you have been declined a property loan before, the rejection can be viewed in your credit record. This is a red flag for lenders and they may turn down your LAP request.

Frequent Job Changes

Lenders look for job stability in applicants when they review loan requests. This is why most lenders mandate an applicant’s work experience with a single company for a minimum of three years if they wish to secure a Loan Against Property. While processing an application, lenders also evaluate the organisation where you work and its credibility. Hence, desist from switching jobs repeatedly within a short period of time to stand a better chance of availing loan approvals.  

Unauthorised Builder or Property Construction

If the builder of your property is not approved by the lender for any reason or is blacklisted, your loan could be rejected. Even if the builder is approved by the lender, the constructed building or house that you pledge as collateral may not be authorised. Lenders steer clear of properties which do not measure up to their parameters or possess the requisite permits/compliances from authorities. In these cases, a loan will not be sanctioned. So, before you apply for a loan, ensure your house or builder does not figure in the lender’s list of unapproved builders and/or building projects.

Address on Defaulters List

Having the same address as someone who has defaulted on credit card dues or loan repayments gives lenders a solid reason to deny you a loan. Often, lenders may have negative pin codes based on past delinquency experiences, because of which, they may not issue loans to certain residential addresses that match a significant number of defaulters on their list.

Also Read: Top 5 Issues Regarding Loan Against Property Application Rejection that You Might Face 

Age of the Applicant

Older applicants close to retirement or with shorter active years in the service may find it difficult to obtain a Loan Against Property. Lenders are usually reluctant to grant them loans as they might not have enough funds to manage a loan towards the end of their careers. In such a situation, you can try opting for a short-term loan although this may result in higher EMIs. Or, you may apply with a younger co-applicant who has a good credit profile.

Also Read: Reasons to Maintain a Positive Credit Profile and a High CIBIL Score 

Holding a Poor Credit Record

Lenders look up an applicant’s credit record to understand whether s/he can repay the mortgage loan on time. Late payments and defaults denote bad credit habits. Lenders will consider such applicants to be unreliable and refuse their application. You may then go in for a credit repair or borrow from another lender.

Insufficient Earnings

In order to grant a Loan Against Property, lenders need to be assured that you have the financial means to repay the loan. They have an expected income threshold, which is one of the foremost factors for establishing loan eligibility. If you do not fit the bill, your loan request will be turned down. You can either apply for a lower loan amount or show additional sources of earnings in the form of a salary raise, part-time earnings or rental income to improve your approval chances.

To Conclude

To avoid a Loan Against Property rejection, use a property loan EMI calculator to check loan feasibility and a Loan Against Property Eligibility Calculator to assess your eligibility for the loan. Most lenders offer free access to such financial tools online that prove useful in choosing the best LAP. Once you match your eligibility and arrange for the essential documents, you can apply for a Loan Against Property online for added convenience and avail of the required funds quickly, which will enable you to address your financial needs in no time.