Rejection sucks, but do we actually know with whom the blame really lies? Find out.
After all the searching, surveying and checking, you have finally found your perfect home. Now comes the hardest part. The property is not yours to call home yet. Unless you buy it in cash, like most homebuyers, you would need to rely on a bank loan to turn your dream into reality.
Applying for a home loan can be quite nerve-wracking for first-timers. What’s more, it can be very frustrating if the application is unsuccessful. If your loan is rejected, it’s not the end of the world, but it is human nature to put the blame on someone else.e. In a way, pointing the finger may also help you understand why your application was rejected, and what you can do differently in your next attempt. We have made a list of the top 3 contenders for the blame game:
- Bank Negara Malaysia
- The Banks
- We, as borrowers
Now, who would you choose to blame?
1. Bank Negara Malaysia
Plenty of people blame Bank Negara Malaysia (BNM) for the many loan rejections in Malaysia. Are they the culprit, though? Well, BNM is the one making all the loan policies in Malaysia and most people may feel that the ever-tightening policies are making it more difficult to borrow from banks.
However, we need to look at this from another point of view. If BNM did not have all these policies in place, we will most likely face a subprime mortgage crisis, as what occurred in the USA in 2008. How did this crisis come about? This happens when banks get greedy and start lending to anyone, even to borrowers who have a history of low credit scores and problems with debt. In time, these high-risk borrowers will default on their loan repayment and this will have a ripple effect and evolve into a national issue.
Therefore, we must remember that under BNM, we have a prudent and balanced lending policy. We need it to protect our country. Best to think again before pushing the blame onto BNM.
2. The banks
If we do not blame BNM, can we blame the banks instead? After all, they are the ones who approves or rejects the loans. Let’s try this – put yourself in the bank’s shoes. Say you are the lender, and your friend the borrower, wants to borrow RM50,000 from you. You know that your friend earns RM5,000 a month. Each month, most of his money goes into paying off his debts. The big question here is, will you lend the money to him? The risk of not getting your money back is very high. Logically, most people would think twice or not even consider lending their friend that sum of money. A bank thinks the same way – they are not a charity, but a profit-driven organization who are accountable to their shareholders.
In some banks, they have their own internal policies in lending on top of the existing BNM policies – such as having their own scoring system. As different banks have different lending policies you need to know which bank is the most suitable one for you by conducting your own research and comparison. But do keep in mind that even before they look at your documents, they will first check your credit rating. If your rating is low, it’s not hard to see why your application may be rejected immediately. Do you still think we should be blaming the banks?
MORE ON WHY BANKS HAVE DIFFERENT LENDING POLICIES: How does DSR affect my home loan eligibility & how to calculate it?
3. The borrowers
How about if we blame ourselves, the borrowers? Plenty of people are laden with debts from credit cards, personal loans, luxury cars and such. Would it be fair to ask the banks to lend them more money? The risk of non-repayment is very high.
Now that we’ve assessed this matter from various angles, we can conclude that the best way to secure a successful application is by ensuring that we, as borrowers, responsibly check that everything is on track before applying. Rather than forcing the situation, why not take a step back and do some proper financial planning, as this can increase the probability of your loan being approved.
Here are some tips for you…
- Only buy what you can afford.
- Record your income and expense statement every month.
- Do not spend all of your earnings on unnecessary items.
- Practice a good saving habit.
- Your personal bank account should never be left at zero or a very minimal balance at the end of the month.
- Look for part-time job(s) to boost your income.
Also, check out A beginner’s guide to Islamic home financing in Malaysia.