Reasons why banks reject a loan
Loans are the initial way givers for any type of investment. They are available in various packages and with innumerable options. However, if a person wants to seek a loan, there are few requirements and procedures which should be followed by him. Most of us are unaware about the critical reasons where a bank rejects a loan. In order to avoid such situation, one has to follow the below points.
Home loan rejection:
If you are planning to seek a home loan from a bank or any other financial institution, you should ensure that you pay your credit card dues in full on time, you should increase your income levels; you should complete the payment and close your previous loans. Apart from just these reasons, there are various other reasons where a home loan can be rejected.
Reasons for a bank to refuse you the loan:
Job hopper:
Job changing has become very frequent in this generation. Most of the youngsters change their job frequently due to various reasons. The instability of a person’s career can be one of the main reasons for a bank to refuse a loan. Banks consider the stability of a job as an important aspect and in many countries the banks insist that the applicant should be employed in order to be eligible for a home loan. Henceforth, constant job shifts might affect the applicant’s credit worthiness. Avoid shifting your job frequently and get your loan sanctioned easily.
A faulty residential address:
You will be rejected of your loan if your residential address is on the defaulter list. In most cases the person seeking the loan resides under the same roof of a person who has slipped up on a loan payment or hasn’t paid the credit card dues. This is apparently informed to the national credit bureaus and the loan rejection chances become high. The defaulters address can be one of the main reasons for your loan to not get approved. The same implies to the family member as well. In order to avoid this, ensure that you discuss such issues with your relationship manager of the bank and inform him about the previous tenant and if the defaulter is the family member, ensure that he/she is not dependent on you.
Incorrect policy guidelines:
Every country and state has a bank with their own internal policies. These policies and the related information like the debt profiles and geographic areas should be clear and in case they are not appropriate, there are increased chances of the bank denying providing the loan. In such cases, you can take it up for discussion and give additional security in the form of a guarantor or insurance policies, fixed deposits, collateral securities and so on. You can also provide proof of the repayment ability.
Loan is rejected in case if it is for an old building:
In case you want to seek loan to buy an old building, most of the banks do not grant the loan especially if the building is more than 20-30 years old. The bank policies related to these issues vary from each bank. In such cases, you can try increasing the down payment and add a form of security to negotiate for a lesser loan amount as the land value is considered before granting loan on older buildings.
Loan application being rejected earlier:
If your loan application has been rejected earlier, there are high chances that your application will be rejected again. Most of the banks have all the records of the loan rejected applications with them. In case your loan was rejected earlier, the next time you go seeking a loan, the database will show your rejected loan form. This will also affect your loan worthiness. In such cases, avoid applying for a loan when your loan is rejected earlier and wait for a time where you know that you can apply for the loan. Also if there is another reason for your earlier loan rejection you can explain it to the bank and they will reconsider it.
