Home loan top up rejected

[karnik_sachin@rediffmail.]

Dear All,

I would require help and advice on following issues, just to give a background, i had applied for top up of home loan with IDBI Home Finance Limited which was rejected by the bank as i had a low cibil score of 588. Following are factual information:-
CIBIL score is low on account of ICICI Credit card that i use to hold, ICICI have leived late payment and Interest charges on me which i had disputed in FY 2008. Now they have offered me an settlement of INR 2400/- towards full and final payment of dues aganist the outstanding of INR 10500/-
Current home loan with IDBI Home Finance Limited is my second home loan. Earlier home loan has been repaid and account is duly settled. My earlier loan account number was MUM which was duly cleared on 29.11.2007 for INR 629,897/-.
In year 2008, property value of the flat when purchased was INR 28 lacs and loan taken was appox INR 21 lacs. Now the flat value is appox INR 50 lacs. My salary that time was INR 40,000/- and now it is appox INR 80,000 per month, then why my repayment capacity is questioned?
Now IDBI is not willing to consider my case, though i have good credit history with. Not a single chq payment have been returned in tenure of 4 years and all paid in time. My question is:-
Do i have a option in which i can escalate this matter in right forum as value of my home is 50 lacs, current home loan is INR 21 lacs and top up asked is 2 lacs.
Since now ICICI has agreed to settled the account, can't they consider this.
More importantly, i have been banking with them for past 4 years with good track record, is it sensible to see the external records (ie. CIBIL) about which they do not have any idea why the problem has happen and it has been listed as defaulter, instead of checking there internal database ?
I would appreciate your help on this matter as i think like a slave in hands of financial institutions.

Regards
SK

[karnik_sachin@rediffmail.]

Cardbhai

Please reply, i need ur guidance

[cardbhai]

Hi, Sorry for the delayed response, here is the take

1. CIBIL Score of 588 is Low compared to what some have got 822. http://credit.cardbhai.com/2010/04/difference-in-cibil-report-banks-vs.html

2. Settle the ICICI Issue As Soon AS Possible and this will definitely help in inching up your Credit Score.

3. If you can answer the following questions, I maybe able to tell you the reason for your home loan top-up rejection

3.a Are you staying the house on which you have availed the Loan ?
3.b What is your Rate of Interest ?
3.c What was the reason you have asked Top Up for as stated in the application ?

- CardBhai

[karnik_sachin@rediffmail.]

Thanks for the reply. My reply as under:-

Are you staying the house on which you have availed the Loan ? - YES
What is your Rate of Interest ?- 10% Floating
What was the reason you have asked Top Up for as stated in the application ? - I intend to purchase one more house and use this money for that. And also clear some existing liabilities which will help me to save on monthly basis

[cardbhai]

Home Loans come with Low Interest Rates compared to others. Top Ups are mostly rejected because they don't find a compelling reason that the amount disbursed will be used for the purpose as detailed in Provisions of Home Loan. Banks and RBI are very strict that Home Loans should be used for Home purpose only; after all you are claiming Tax benefits and also enjoying discounted rate. Banks fear it may find this money into stock markets or other speculative instruments, and that's why they are CAUTIOUS.

With Just Less Than 200,000 you want to purchase another House ? WoW That's a Deal. But Anyway, you should have applied for New Loan demonstrating the funding pattern - Cost - Own Funds, Loan etc.

Credit decision making process by Banks is Opaque to individuals like us. So we do not know on what Basis IDBI has rejected you offer.  I'd personally go and sit with the Bank Manager, show him evidence of Rs 80,000 Monthly Income and Payment Track Record and Ask him to mediate and get the Top Up Sanctioned. Managers may not be willing to take the risk.

If negotiations with  IDBI Bank fail then you can exercise your Right by demanding the reason for home loan rejection  http://rbidocs.rbi.org.in/rdocs/Notification/PDFs/76129.pdf [ 2007, Notification but still HOLDS Good ]

In my honest opinion, don't take this case forward, just negotiate with manager, get to know why it was rejected, catch hold of a banker, your CA and see how to get your new loan and house, after all isn't that your purpose ?

[karnik_sachin@rediffmail.]

I agree. Thanks for your valubale advice.

I will follow what u have said. Yes INR 200,000/- is my funding amount for the rest i will take home loan.....

Thanks anyway, it was great help