Reasons Why Your Loan Against Property (Lap) May Get Rejected

Why Your Application for Loan Against Property May Be Rejected

• Property Is Too Old:

The age of your property is an important factor. Your house may look all spick and span to you, but if the building is quite old, loan may not be sanctioned. Even if you have all the required documents, the bank will evaluate its market value and houses older than 25 years are usually not highly rated. The younger your property is, the longer will be your tenure or bigger will be the loan amount. Renovating the property is considered a plus point while applying for a loan. 

• No Job Stability:

Regularly job hopping may have given you good hikes and promotion, but lenders do not really appreciate this practice. They look for job stability while sanctioning loans and few financial institutions even insist that an applicant must have been employed with a particular company for at least three years to be eligible for the loan. For lenders, stable jobs mean regular income with higher chances of timely repayments.

• Rejection of Previous Loan Application

Let bygones be bygones goes the adage, but lenders do not believe in that. Any past rejections of loans can create hindrance in getting one approved in the near future. A review of credit profile will give details of all your loan applications previously rejected and it will have an adverse effect on your credit worthiness leading to loan rejection. 

• Poor Credit History

Not just for LAP, but for any kind of loan, good credit score is a must. It shows that you have paid your previous loans on time and mostly keep a decent balance in your account. It is an indicator that you are well placed to repay the loan before the deadline. Good credit score also helps bring down interest rates. So, pay your outstanding credit card bills and previous loans before applying for LAP.

• Inadequate Income:

Along with unstable jobs, low income is a great deterrent in getting loans sanctioned for desired amount. Not more than 50% of the income should be directed towards paying loans and if you already have other debts, lenders will not sanction LAP. If you do not meet the minimum income eligibility criteria, either wait for a hike or take up a second job to meet these requirements. 

• Age Criteria Not Met:

Though loans can be availed by anyone above 18 years, lenders are wary of giving it to people below the age of 21 and those nearing 60. Their concern is while fresher’s earn meagre salaries, those reaching retirement age will be out of a job soon. And financial institutions do not loan big amounts to those with lower income. In such situations, you can opt for a short-term home loan, but they come with higher EMIs.   

• Negative Field Investigation:

Lenders initiate their own verification and investigations of your property in cases of LAP and any deviation from the details filled during the application can lead to immediate rejection of the loan application. They check the legal documents related to the property, its market value, applicant's source of income before approving any loan. So, avoid hiding any facts while applying.  

• Poor Banking Statements

Along with all legal documents of the property, lenders also do a thorough check of bank statements for eligibility calculation. They study bank accounts to evaluate the applicant's banking behaviour such as steady income, sufficient balance, timely repayment of loans, investments in fixed deposits or funds, etc. If they are not satisfied, you are at risk of being denied a loan. Salaried professionals need to furnish salary statements of the last 6 months, while those who are self-employed, the last twelve months’ bank statements are required. 

Now that you are aware of the factors that can lead to rejection of a Loan Against Property application, it is advisable to avoid making those mistakes. Just because you own a house does not mean lenders will take it as a collateral. However, following some basics like maintaining a good credit score, a stable job, steady income, and other points mentioned above, which will increase the probability of getting your loan approved.