A recent report published in the Economic Times suggests that the demand for home loans has witnessed a 16% growth during the financial year 2018. It shows the increasing demand for such financing options amongst prospective home buyers; a large number of individuals are now opting for advances to pay for their residents instead of utilizing their own savings.
This rise in the number of loan applicants is also because of several other reasons, including –
- Betterment of the nation’s economy offering superior career options and spending power to individuals.
- Easy to understand the EMI facility.
- Easy access to modern tools such as home loan apps that helps with the application, approval, and verification process.
However, applying for a loan doesn’t necessarily guarantee approval. Candidates must qualify for the eligibility criteria along with other requirements to get it approved. Loan applicants must consider these 5 factors that might cause their home loans approved or rejected.
5 Factors Which Decide Home Loans Approved or Rejected:
Credit history is one crucial factor that financial institutions use to determine whether to approve or reject a loan application. It helps financial institutions understand the repaying habits of a candidate.
Timely repayment of credit card dues, payment of EMIs, etc. helps improve one’s credit score. Usually, applicants with a credit score equal to or above 700 is preferred by financial institutions.
Consequently, candidates with poor credit scores and history might face difficulty while applying for credit. They are also likely to avail only a higher rate of interest.
Employment history & income
When financial institutions lend advances to individuals, the first thing they make sure is that the applicant has a suitable repayment capability or not. Most lenders seek candidates that earn between a specific salary range.
Applicants with a verified and stable source of income are preferred for disbursing credits as the risk involved is comparatively less. Financial organizations also check the stability of one’s employment.
Age is an important factor that is up for consideration in the approval or rejection of a loan application. Working professionals who draw a monthly salary from the private or public firms may face issues in getting their loan approved during the proximity of retirement age. This is because lending institutions doubt their repayment capability due to the absence of a stable source of income post-retirement.
Nevertheless, this age range is usually somewhat relaxed for self-employed individuals who have a definite source of income. It is necessary for everyone to check for the recommended age bracket amongst the loan eligibility criteria before they apply through an online loan app or from another medium.
Down payment, while purchasing a property
No financial corporations offer the total cost of the property as a loan. Financial institutions at the most offer 80% of the property value as advance. Conversely, candidates willing to pay more than 10-20% of the property value as down payment are preferred by financial institutions for loan approval.
Another important factor that every borrower should consider is their repayment tenor. This is the time within which he or she has to repay the principal loan amount along with interest. Usually, the tenor for home loans spans in 5-year brackets like 15 years, 20 years, 25 years, and so on.
Consequently, it is important to determine your ideal tenor during which your financial obligation is fulfilled. One should always calculate their Equated monthly installments (EMIs) and accordingly select a lender that offers a flexible range of loan tenor.
Bajaj Finserv offers a flexible range of tenors up to 20 years to eligible applicants. One can log in to Bajaj Finserv App – Experia and opt for credit according to their ideal tenor easily.
NBFCs like Bajaj Finserv have made the loan application procedure even easier with their pre-approved offers. These offers are available on several financial products including home loans, personal loans, business loans, etc. You can check your pre-approved offer by submitting essential details like name and contact details.
Loan applicants must take these points into consideration before applying for credit. Adhering to these guidelines will help improve the chances of approval. Also, it is convenient to use the best loan app and apply and manage your credit through it for faster application and approval.