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When you apply for a home loan, the bank has every right to accept or reject the same. In case your loan is rejected, your bank may or may not tell you the exact reason. While you cannot demand answers or explanations from them, you should definitely be aware of situations where your application is rejected.
A credit score is an indication of an individual’s creditworthiness. If your credit score is low, banks and NBFCs may shy away from offering you a loan or offer you one at a substantially higher interest rate, or one against collateral, or ask you to provide a financial guarantor. There are many reasons why your credit score is low. The biggest reason is that you may have a poor repayment history wherein you may have delayed EMIs, substantial credit card dues, or have defaulted on, or settled, a previous loan.
Another reason could be that there may be errors in your credit report leading to a low score. Whatever be the reason, you must keep track of your credit score by getting your free annual reports from various credit rating bureaus such as Experian and CIBIL. If there are factual inaccuracies, you can easily get them corrected with the credit bureau.
People are generally under the impression that banks do not grant home loans for buying properties in old buildings, which is not correct. However, if the residual life of the property, as evaluated by the value measurer appointed by the bank, is only a few years or if the physical condition of the property is poor, the lender would not be willing to take the risk of granting the home loan.
A home loan is granted predominantly on the basis of the documents you provide. If the documents required for home loan are incomplete or not in order, the lender is constrained while appraising your home loan application objectively.
All lenders have an age eligibility criteria which you must meet. Typically, the lenders need you to be in the 18-65 age brackets. If you are nearing retirement, the chances of rejection are higher, as you will be left with insufficient time to repay your home loan. However, you may be provided with a loan with a much shorter tenure that overlaps your working life.
Your employment history is important to a lender who’ll assess it on multiple parameters, namely:
If you apply for a home loan, when you are already deb-ridden with previous loans, the bank has the right to reject your loan on the grounds of your liabilities being higher than your income. The bank has the right to think that your leftover income (after honoring all existing commitments) wouldn’t be enough to meet the EMI for the home loan that you have requested.
Many banks consider some job profiles negative for lending. These include journalists, lawyers, policemen, etc. If you belong to any of these professions, it is advisable to provide the bank with a security in the form of a guarantor or collateral to secure a loan.
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