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A home loan is one of the best options, to arrange the funds needed for buying a home. Generally, it is easy to avail of a home loan, if the applicant has all the documents in place and has a good credit history. However, banks may still reject a home loan application. Some important reasons for rejection are:
- A bad credit score.
- Bad credit history, which may include a loan settlement in the past that is reflected in the credit report.
- The project is not approved by the bank.
- The home loan application is made for a project that falls in a restricted area.
Getting a home loan, despite a prior rejection
According to Shaji Varghese, business head, PNB Housing Finance Ltd, “An applicant can still get the loan, even if it is rejected once, by taking the following measures:
- Due to a bad credit score – In this case, the best solution is to upgrade your credit score by settling the previous/ongoing dues. The score will improve over a period of time as the dues get cleared, allowing you to avail of loans as per requirement.
- Due to bad credit history – In case of a bad credit history, you should settle the pending dues with your financier and obtain a ‘no dues certificate’. After settling the dues, you can again approach the home loan provider and re-apply for the loan.
- Lower financial eligibility than the required loan amount – In such cases, you should meet the home loan provider and explore the following possibilities:
- Spreading the loan over a longer tenure, which can reduce the EMIs.
- Adding a guarantor or a co-applicant, which can increase the income that is considered by banks.
- If the applicant has an ongoing loan, which is of a shorter duration and higher interest, then, it is advisable to close the loan to enhance the financial eligibility.
- You can search for lenders who may approve the application, albeit with a higher charge perceiving the risk or/and by adding a guarantor along with additional collaterals.
- A problem related to project approval – You can request your preferred home loan provider to approve the project. If that is not possible, you may look for an alternate property which is approved by them.”
Improve your chances
According to experts, the CIBIL report is a good starting point, in assessing a home loan applicant’s credit-worthiness. An adverse report, including but not limited to past failures in paying EMIs, settling credit card bills and outstanding loan balances, may impact the applicant’s ability to acquire fresh credit. The age and the ability of the applicant to earn a steady income, are also major factors.
“Keep your credit history clean, by settling outstanding loans and bills in a timely fashion. This will help you when your credit-worthiness is being evaluated. Compare the long-term benefits of having a floating rate loan versus a fixed rate loan and determine what is best for your needs,” advises Adhil Shetty, CEO of BankBazaar.com.
Tips to get a home loan easily:
- Maintain a healthy CIBIL score for eligibility.
- Reduce other obligations, to have enough money to repay a home loan.
- Identify a pre-approved property by the lender.
- Check your CIBIL report to clear any derogatory information, if any.
- Avoid making too many inquiries for loans.
- Maintain a clean banking record (For example, avoid cheque bounces, as this may give a negative view to the lender).