Top Five Reasons Your Loan Against Property Application Might Be Rejected

Top 5 Issues Regarding Loan Against Property Application Rejection that You Might Face_banner

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Top 5 Issues Regarding Loan Against Property Application Rejection that You Might Face_WC

5 min 14 Feb 2023

Reasons for Loan Against Property Rejection

Highlights

Loan Against Property: Overview
Reasons for Loan Against Property Application Rejection

Secured in nature, Loans Against Property can be an excellent way to arrange a substantial amount of money in a short span. Loans Against Property are also competitive loans, with interest rates varying in the range of 9.30%** p.a. to 12.00%** p.a. for self employed borrowers. Loans Against Property is also referred to as property loans and mortgage loans.

The eligibility criteria for these loans are also quite simple and straightforward: borrowers must be Indian citizens, should ideally have a credit score above 750, have a stable job and a stable income. They must also be the rightful owner of the property they wish to mortgage. The property loan as collateral must be free of all kinds of disputes.

Though Loans Against Property or mortgage loans have simple eligibility requirements, many borrowers may face application rejection. Why does this happen? In this article, we answer this question - we tell you about the mistakes one must avoid if they do not want to get their Loan Against Property application rejected.

5 Reasons Why Loan Against Property Application May Get Rejected

Issues with the Property Pledged as Collateral 

One of the main reasons why Loans Against Property applications can get rejected is if there are any issues with the property pledged as collateral. The property you are using as security for your loan must not be disputed in any way. Lenders do not accept disputed properties or properties with lien on them as collateral. Then there are some properties that are on lenders’ ‘no-acceptance’ list due to legal reasons. Lenders do not sanction loans against such properties.

So, before applying for a Loan Against Property application, check the quality of your collateral. This will not only help you get your loan application get approved quickly, but you will also get better terms and conditions on your loan.

Incomplete Documents 

When it comes to any loan, documentation is very important as it allows a lender to understand and gauge a borrower's repayment capacity and creditworthiness. However, in the case of a Loan Against Property, documentation is even more important as lenders must make sure that the property being pledged as collateral isn't disputed in anyway. Thus, when it comes to LAP, other than address, identity and income proof documents, lenders must also submit all property-related documents. These include the title deed, income tax certificates, encumbrance certificate, no-objection certificates, documents that establish the entire ownership chain of the property in question, etc. If any of the documents is missing, your application will get rejected.

Before beginning the loan application process, go to your lender’s website and check all the documents they require. Keep all the documents ready to avoid rejection.

Inadequate Credit Score 

Lenders require borrowers to have a good credit score eligible for a better Loan Against Property terms. A good credit score indicates high creditworthiness and excellent repayment capacity. If your credit score is between 700 and 750, your loan application may get approved but you may not get favourable loan terms and conditions. However, if your CIBIL score is low, your application may get rejected.

If your credit score is not up to the mark, work on it first and then apply for a loan against property to avoid rejection.

Also Read: How to Increase Your CIBIL Score Above 800

Not Meeting Your Lender's Eligibility Requirements

If you want to avail of a Loan Against Property, you must meet your lender's eligibility requirements. If you do not meet their eligibility requirements, your application will get rejected. Application rejection is something you must avoid as when loan applications get rejected, the rejection negatively impacts one's credit rating and a low credit rating makes it difficult for borrowers to secure a loan in the future. 

Income Issues 

Loans Against Property are a type of secured loan. These loans involve collateral. However, just because a Loan Against Property involves a collateral does not mean your lender will not check your income and job stability to make sure you can repay the EMI comfortably. If you do not meet your lender's income criteria, your loan application can get rejected. Ypu can use a Loan Against Property Calculator before beginning the loan application process to figure out the loan amount you qualify for against your income and apply for this amount or an amount lower than what you are eligible for.

Final Words

Loan application rejection leads to a negative credit score and therefore, must be avoided. The above-mentioned tips will certainly help you avoid mistakes that lead to Loan Against Property rejection. So, keep these tips in your mind when availing of a Loan Against Property.

Read Also: How to Ensure a Good Credit Score

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