With a loan against shares, you can finance your current requirements without losing out on the potential returns that the investment offers. This is because when you pledge shares, you retain their ownership and they continue to earn returns through the loan’s tenor.
However, it is possible that you opt for the loan against shares and find that your application is rejected. In such a case, look at what you should do to improve your chances of approval before you apply again.
Avoid Reapplying Immediately
When your loan has just been rejected, avoid an immediate reapplication even if it is with another lender. Not only can a rejection affect your credit score, but it can also have a negative impact on your next loan application if you apply early. Take the time to review your application and find out why it was rejected in the first place and apply it with a different lender thereafter.
Choose a Lender with easy eligibility Criteria
Before applying with another lender, consider the loan against shares eligibility criteria. Ideally, you should try to apply for a loan against shares with a lender that has easy eligibility criteria. Leading NBFCs offers Loan Against Shares if you are an Indian citizen over the age of 21 years with a regular income and have shares worth Rs.10 lakh or more.
With this loan, you can avail funding up to Rs.10 crore, enjoy online account management and a Flexi Loan facility. This allows you to borrow from the total sanction as you need to and pay interest only on the used amount. You can also choose to pay interest-only EMIs and make a lump sum principal repayment at the end of the tenor.
Choose a Longer Tenor and Lower Amount
If you have chosen a very short tenor, the lender may not be confident in your repayment abilities. So consider applying for a longer tenor the next time or reduce the loan amount you seek, if possible. This will help you gain the lender’s confidence. Additionally, don’t worry about the implications of increasing your tenor as you can foreclose or prepay your loan at no extra charge.
Pledge a higher amount of assets
Increasing the number of units you have pledged can also help you improve your chances of approval for a loan against shares. The more security you are able to offer, the less worried your lender will be.
Repay Outstanding Debt
In case you have a mountain of outstanding debt, repay it before you apply for a loan against shares. This is because your lender may consider your income to be insufficient to meet your existing financial obligations as well as EMIs for a loan against shares. Having a lower debt to income ratio shows the lender that you are borrowing within your means and aren’t credit hungry.
Disclose all your Sources of income
You may have forgotten to mention the additional income you receive from leasing out your second home or income from a part-time job. By disclosing all forms of income you show the lender you have the adequate financial backing to take care of your loan repayment. So be sure that you list not just your salary, but all your sources of income.
Consider the above points when your loan application has been rejected and increase your chances of approval the next time around.