Have you ever been hounded by telemarketers urging you to apply for a loan? Calls, text messages, WhatsApp or even meeting you in person, representatives of financial companies leave no stone unturned when it comes to convincing you to take a loan.

But how is the loan application processed? Do lenders really bend over backwards to hand you the loan cheque? It does not quite work that way.

Yes, sales personnel employed by financial institutions are aggressive in their attempts to lure you. They have to be; their commissions depend on it. And if one takes the bait and applies for a loan, the situation is likely to change by the time the application is processed.

It is the borrower who is expected to satisfy the credit parameters and fulfil all the eligibility criteria for the Home Loan.

Let’s get down to the basics. What do you think is the main eligibility criteria for taking a Home Loan?

The simple answer is the borrower’s ability to repay the loan.

This means the income of the loan applicant must be enough to pay the instalments on time. The lender provides a schedule for paying the equated monthly instalments (EMIs).





Let’s consider these aspects one by one.

Income – This is important because timely repayment of the loan depends on whether the applicant has regular cash flow. Besides, the borrower’s salary must be proportionate to the loan amount. For instance, a person earning Rs.15,000 a month is not likely to get a loan of Rs.1 crore because he may not be able to afford the EMIs.

Age – The borrower’s age helps the lender assess how many working years he has to repay the loan. Say, a person is 50 years old and is looking for a repayment tenure of 20 years. The lender would want to know how the borrower plans to repay the loan after retirement.

Then again, another applicant may be young and earning a substantial salary. But she may have a number of dependents and unavoidable expenses. Would she have enough cash to make the loan repayments?

Strictly speaking, banks and finance companies rarely investigate a person’s financial position. For the most part, they check if the loan applicant has a good take-home salary. The lender assesses whether this salary would more than adequately cover the monthly instalments.

The applicant’s credit history and credit score also hold the key to loan approval. Both these parameters reflect the applicant’s track record of loan repayments.

The lender accesses the applicant’s credit information report and all existing loan details from CIBIL (Credit Information Bureau India Ltd.). More loans running concurrently obviously make the applicant a high risk.

Applying for a Home Loan

As an applicant for a loan, you should check your eligibility beforehand. Knowing the amount you are eligible for and at what interest rate is very important information that will help you minimise your chances of loan rejection.

Banks and finance companies offer Home Loan Eligibility Calculators that help you gauge your loan worthiness. This will enable you to calculate how much loan you are eligible for.





But what if you had already applied for a housing loan but faced rejection? While there are numerous reasons why your loan application may get rejected, you don’t have to be disheartened. You can still improve your chances of loan approval the next time you apply. How?

Add a co-applicant: Find an earning member of your family to be a co-applicant. This can be a spouse, siblings, or parents. Another option is to get a guarantor to back up your application.

Restructure your repayment plan: Was your loan application turned down due to irregular repayments towards existing loans? You could negotiate with your current lender to restructure the repayment plan. If you follow this for some months, your credit score will improve. Do you have many loans to pay? Then try to consolidate the different loans into a single loan. Clean up your credit record

Steady income flow: Regular cash inflows are important. This will be reflected in your bank statements. Proof of regular savings and investments also go into assessing eligibility.

Additional income: Salary may not be your only source of income. Show any other income sources that you may have. These could include your professional fees, commissions, or periodic payments. Include these so that your cash flows look adequate. This may even be dividend income or interest income.

Variable component of salary: The fixed salary component is important. But look beyond that as well. You may have a variable component to your income. This could include performance-linked pay, for example. You need to keep records of such payments.

Pay off high-cost, short-term debt: High-cost debts do more harm to your credit score than anything else. You can prepay them. Or, get the lender to agree to easier terms and reduce the interest burden.

With interest rates favourable, now is as good a time to take a Home Loan as any. And non-banking financial companies (NBFCs) such as Bajaj Finserv offer instant approvals and Home Loans at attractive interest rates when you apply online. Find out how: