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

Secured in nature, Loans Against Property are an excellent way to arrange a substantial amount of money in a short span. Loans Against Property are also affordable loans, with interest rates varying in the range of 9.75%** p.a. to 18.00%** p.a. In fact, Loans Against Property, also often referred to as property loans and mortgage loans, are the second cheapest loans after Home Loans.

The eligibility criteria for these loans are also quite simple and straightforward: borrowers must be Indian citizens with credit score above 750, 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 get their application rejected. 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 Applications Get Rejected

 Issues with the Property Pledged as Collateral 

One of the main reasons why Loans Against Property applications get rejected is 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. Similarly, many lenders also do not accept land as collateral and most lenders do not accept any property older than two decades 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, if your Loan Against Property application has been rejected, check the quality of your collateral. Often, Loans Against Property applications get rejected due to issues related to the collateral. Pledge a good collateral – a property located in a central location having high resale value and one that is not disputed in any way. 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 

All lenders require borrowers to have a credit score of 750 or above to be eligible for a Loan Against Property. Such a 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 won't get favourable loan terms and conditions. However, if your CIBIL score is below 700, your application will get rejected for sure.

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. 

Read Also: Check Loan Against Property Eligibility & Required Documents 

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 burden you wish to take. If you do not meet your lender's income criteria, your loan application will get rejected. 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