How many of you have had your loans rejected by the bank? Today, new applications for loans may have a rejection ratio of up to 50%, especially for new properties. Main culprit is because everyone is trying to buy a property which they like very much but the price is on the borderline of what they can afford. In fact some even drive a car which they could hardly afford and this made their housing loan application become even harder to approve. Of course, last but not least, the ever increasing credit card debts which is plaguing those below 35 years old here in Malaysia. Okay, for those sure fail cases, you really have to control your wants and manage your needs. However, for those borderline cases, what can you do about it? My friend, the mortgage guru here in Malaysia, Mr. Miichael Yeoh shared the following ways of getting your loan application REJECTED.
Overconfidence. I was once approached by a couple after my seminar. They look very worried and pull me to one side for a private discussion. Guess what happen. They bought a RM3.5 million commercial property paid 10% and immediately sign Sales Purchase Agreement(SPA). Their biggest mistake is not securing the loan from the bank before paying RM350,000 down payment. After that, their nightmare started. They approached 5 banks 3 rejected 1 approved at 50% another at 60%. They need a margin of 85%.
Lesson to be learned: No matter how confidence you are, sometimes that are a lot of unforeseen circumstances that can affect your loan approval. Better make sure your loan is approved and you have sighted the Banks Letter of Offer before proceeding to sign SPA.
Giving Fake Documents. As the name suggest, this should NOT have been done in the first place. I have seen borrowers who are worried cannot get their loan approves by the banks have resorted doing such thing. I also had seen syndicates who are expert in this field. They can even make the EPF statement looks so real. I am not suggesting you do this to get your loan approval. Banks have ways to verify your documents. Like for EPF contributions by a loan borrower the banks will be able to do a cross check with EPF department.
During my time working in the bank, I have seen many altered financial documents submitted by loan borrowers to me. Sometimes, it is not difficult to spot these. Even the loan is approved but when it reaches the disbursement stage if the banks finds out they have all the right to cancel the facility and report to the police. I have seen such cases happen before. My 2 cents advised to all loan borrowers. Do not resorts to such way in order to get your loan approve.
Panic. Imagine yourself as a loan borrower. The bank rejects your loan. What will be your reaction? Most borrowers will PANIC. You will start to get worried especially time is not on your side. The next thing you will do is photocopy 10 sets of your financial documents, then submit to every bank you can find. RED ALERT. This might make your chances in loan approval lesser. Banks can tract your loan submission and rejection to any other banks via Central Credit Reference Information System. In short we call it CCRIS.
You go to Bank A and Bank A rejects, Bank B also rejects, Bank C rejects and Bank D actually you have a slim chance to get approval but the problem is they saw 3 previous banks reject your loan. Your guess is correct, they will also reject this loan.
From my experience, different banks have different approval criteria. One bank rejection does not mean you are in trouble. Maybe you do not fit into what the bank is looking for as a borrower. This brings us into the next discussion topic, No Knowledge on How the Banks Approves a loan.
No Knowledge on How the Banks Approves a loan. Many borrowers are complacent when it comes to loan application. They taught loan approval could not be that difficult. This is one of the main reason loans gets rejected. Well, if you look at the past few years Bank Negara have introduce many measures to curb lending. It will not be easy anymore and it is not going to be easy in the future.
You need to be a savvy loan borrower. Knowledge is power. With proper knowledge how banks determine credit approval, your chances in getting loan approval will definitely increase. You don’t even have to trouble yourself and send your documents to many banks. Choose the banks which you have the most likelihood to get approval. Some banks approval are more relax than others.
My personal advised to every loan borrower out there.
- Do your Research
- Plan your Mortgage Submission
- Know your Bankers
- Attend talks to learn more.
Do visit Miichael’s website for more information on mortgage.
Hope everyone has gained some additional knowledge about what to avoid so that your loan will be approved. The same advice remains, buy what you can afford. The first house that you buy is not likely to be the last house you buy. Upgrade is easier when you are higher up the corporate ladder and by then you would also be more knowledgeable about what you need. Thus, one sure way to make sure your loan is approved is to live below your means and buy within your financial capability.