Reasons a Loan Against Property (LAP) may be declined
We know that applying for a loan can be a tiring process. On top of that, imagine the heartache and pain if the loan request is declined. While all financial institutions have their own set of rules regarding loans, there are some common parameters which all of them consider. Read on to understand the common reasons why your loan against property may not go through.
Poor credit score
The first and foremost aspect that a bank or lender checks is the credit score or credit history of the applicant. A poor credit score indicates that the applicant has either defaulted or delayed loan or bill repayments in the past. Such cases are a red-flag for the banks and hence most of the times the loan requests are rejected.
For any lender, the utmost concern is that the borrower should be able to repay his or her money. If the bank is not convinced that the applicant has the financial capability to repay the loan, the loan request may not be accepted. It is especially true if the applicant already has a lot of debt and ongoing EMIs.
Instability in employment
For salaried individuals, this could be one of the most important reason for a loan request to be declined. Instability in employment gives the lending institution an impression that the person is not disciplined and may not be able to repay the loan in the specified timeframe. Most banks have a mandate that applicants need to be with their current organization for a certain number of years to qualify for the loan.
Issues in property documents
The first thing that the bank or any other lender will check in case of a LAP are the property documents. If the property is entangled in any legal dispute or other such issues or if the documents are not in proper order, then your loan request may be turned down.
If the builder of your property is not in the lender’s approved list of builders, it might be a cause of concern. Similarly, if the property’s plan or project is not approved by all the regulators, it may not be possible to apply for a loan against such property.
Number of candles on the cake
In simpler terms, age of the applicant can be a determining factor. If you are on the verge of retirement or nearing that age, it might be difficult to get a loan. It is because banks are unsure how will you repay the loan once you have retired. What might help is to go for a short-term loan that you can repay before your retirement.
History of loan rejections in the past
Blasts from the past can also play an important role in rejection of loan requests. During your credit check, if the lender finds that you have applied for multiple loans in the past which have been turned down, they become wary of such requests.
So, before you apply for a loan against property, make sure you take these points into consideration.