Top 5 Problems Faced by House Loan Borrowers in India

With more and more lenders willing to offer a home loan, getting a loan may seem easy. But, when you start the process, you may come across various hurdles. Read on to know more about the problems you may face while applying for a home loan.

Today, you may come across various advertisements from lenders who promise to give you a home loan in a seamless manner and at an affordable rate. When you initiate the process, you may realise that getting a loan is not as easy as it seems. After all, you must comply with several procedures, which may cause hiccups. Discussed below are the most common problems you may face with your home loan application, and the appropriate steps to tackle it.

  • Getting your home loan application rejected at the first stage

The lenders reject many home loan applications at the first stage of the assessment itself. The rejection happens mainly because the borrowers fail to meet the lender’s eligibility criteria. This could be age, income criteria, not providing sufficient documents to showcase financial stability, the property not passing the lender’s assessment standards, etc.

The best way to avoid rejection of your home loan application is to check the lender-specific eligibility criteria and apply for a loan with lenders that suits your profile. Also, keep all your documents handy beforehand to sail through the preliminary verification process.

  • Not getting the processing fee refund

When you submit your home loan application, the lenders charge a processing fee, which is generally up to 0.50% of the amount applied, and the cost is usually non-refundable. If the lender rejects your loan for any reason, you will not get the processing fee back. This is one of the biggest hurdles that home loan applicants face.

If the lender states that they will repay the processing fee if the loan is rejected, getting such a declaration in writing is better. A verbal promise may not be useful unless it is documented. In all other cases, there is no means to get a refund.

  • Not getting the desired amount

The lenders generally sanction the loan based on the borrower’s repayment capacity, financial history, past credit repayment records, other debts, income, average bank balance, employment history, nature of employment, etc. All these factors are clubbed to determine whether the lender will be able to recover the money they lend.

If your loan gets rejected due to insufficient income, or if the borrowers approve a smaller loan than you apply, you can consider applying for a joint loan with another earning member of the family and increase your income standing. Additionally, if you hold investments in LIC policies, fixed deposits, you can use it as collateral and get a loan against it.

  • Being Confused about the interest rate

Many home applicants get confused about whether to choose a fixed rate home or a floating rate loan. Even after deciding on a loan regime, many people face difficulty understanding the fine print of the interest rate.

For example, if you have opted for a fixed-rate loan and believe that the interest rate is affordable, the catch may be that the loan documents will have a clause that authorises the lender to revise the interest rate after specific years. In such a case, the loan will become expensive.

Similarly, if the bank does not pass the benefit of a lower interest rate in the floating rate regime, it will hold little value. Hence, to avoid such a situation, you must be aware of the terms and conditions.

  • Paying the down payment

When you apply for a home loan, the lenders require you to pay at least 10-20% of the loan amount as a down payment. You must pay this amount upfront before the disbursal of the loan. If you fail to pay the down payment, the lender may reject your loan. So, to avoid rejection, make sure to make the necessary financial arrangement to pay the down payment.