When any potential property owner wishes to take a loan, they usually go through a lengthy and tedious process of application with the bank and take time to present the relevant documents and secure meetings with the loan officer. It is therefore a great disappointment and sadness when one’s loan is rejected.

In recent times here in Malaysia, getting your loan approved is not an easy feat. As many as half of all loan applications to banks are rejected regularly. Some banks only approve one third of all the applications they receive. The rejections of loan applications are caused by many factors. Here are some of the reasons why your loan may be rejected:

Poor Credit History



One of the first things that bank officers check when they receive your application is your credit history, meaning the loans you already have and are paying for. This includes things like personal loans, credit cards and even PTPTN. If you are found to not be paying these loans on time, this will give a poor impression of your performance as a paymaster.

There are several channels where you can check your credit performance, namely CCRIS (Central Credit Reference Information Systems) run by Bank Negara, CTOS (Credit Tip of System). These are places whereby banks and financial Institutions share information about their creditors.

Being Overambitious



Always study the basic requirements to request for a specific loan. If you know you have a bad or questionable credit history, it is better to improve your credit performance before going after more loans.

Your earnings have to be a certain minimum to apply for housing loans as well. Other things that the bank considers is if you have defaulted any loans before. Of course being declared bankrupt will deny you any loans completely

Documents are Incomplete



Ensure that you provide the long list of documents the banks request and make sure they are properly certified as true copy, if you are giving in copies. In any case, if you are caught sending in forged documents, your loan will be immediately rejected and you may face criminal charges for forgery.

Poor Debt to Service Ratio



Despite paying your loans on time, banks may still be reluctant to approve your loan request if your income is considered too small. This income to debt ratio is called Debt to Service Ratio (DSR) and banks use a special formula to calculate it. All banks have a minimum DSR that has to be met before the loan can be approved.

Unable to Prove Income



This mainly affects those who are self-employed, including those who own small businesses and don’t have proven statements of incomes from employers or the like. Banks are very particular that you are able to prove that your income is not only available, but it is stable as well.