It’s appraisal season. You have got a very good salary hike and also a bonus. Time to remember your New Year Resolution…No more wasting money in those Malls and Theatres. No more excessive shopping….This time you are determined to realize your dream. You will buy your dream home this year. You have chosen your home in a good locality. It is well connected by public transport. You have checked all the documents and they are in order. You have decided to avail a home loan from a reputed bank. You have done everything possible to get that home loan, or so you think. Have you considered the nightmare scenario, where your home loan application might get rejected?
Defaulted on credit card payments? You can forget that home loan. If you borrow using a credit card and do not repay the dues, your home loan application could get rejected. But you did not repay the credit card dues, many years ago. This was from a different bank anyway. How will your new bank where you have applied for a home loan, come to know of it? Credit Information Bureau India Limited, popularly known as CIBIL, maintains a record of your past loan and credit card repayments. You are assigned a score between 300 to 900, called the CIBIL TransUnion Score. You have a cibil score above 750? Chances are your home loan could get sanctioned. If you have defaulted on credit card repayments anytime in the past, you get a low cibil score. Banks reject home loan applications which have a low cibil score.
You have a bad cibil score. Maybe you have fallen behind in credit card repayments. You have availed too many loans, which you are struggling to repay. You might have even applied for a home loan from different banks. Banks believe that you are credit hungry and unable to manage your money, if you apply for a loan from many banks. Whatever be the reason, a bad cibil score means instant rejection of your home loan application. Having a bad cibil score is not the end of the road. You can improve your cibil score, but it takes time. It is wise not to apply for a home loan if you have a bad cibil score, as the rejection of your home loan application is more or less certain.
You keep switching jobs
Banks sanction your home loan, only if they are 100% sure they will get their money back. Banks expect you to have a stable job and a good income, when you apply for a home loan. You need to be working for a reputed Company, which gives banks the confidence that you will repay the home loan. Home loans take a long time to repay. Home loans have a tenure which may be 15-20 years. How will you repay your home loan over 15 years, if you do not have a decent job and a stable income? You love job hopping. Changing jobs regularly fetches you a good salary. While an increase in salary might be good, banks simply hate to lend, if you keep switching jobs. Planning to avail a home loan in the near future? Do not change your job now.
Your friend has availed a loan from a bank. If you stand guarantor to your friend’s loan, you will have to repay the loan if he defaults. The bank has every right to ask you to pay back the loan and will do so. Your friend has defaulted on the loan and you have not paid up. The bank holds you equally guilty as your friend, for the default. For the bank you and your friend are both defaulters. Your cibil score is badly affected and your home loan application will get rejected. Never stand guarantor to a loan, unless you are confident you can repay, in case of a default. You must stand guarantor only to close relatives or friends whose loan you are willing to pay back, in case of a default.
This sounds ridiculous, but it’s true. If you stay at an address where the previous tenant was a defaulter, your home loan application could get rejected. If the previous tenant at the place you reside defaulted on his loan, the bank would blacklist both the defaulter and the address. It is most unfortunate that you stay at the same address. You are labeled a defaulter and the home loan application is rejected. You reside in a locality where a number of borrowers have defaulted on loans, or avail loans giving wrong addresses. The bank does not want to take a chance by sanctioning your home loan. Your home loan application will most probably be rejected.
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