I have debt outside the system. Can I get a house loan?
It's well known that the primary consideration for bank house loan approval is whether a borrower meets the criteria for repayment. This information is used to analyze the borrower's income and debt burden. Even with a high income and stable job, if you have significant debt, a house loan may not be approved because the bank will judge you to be overly indebted. For this reason, many people wonder whether "informal debt" also affects a bank's house loan approval process. This article will help clear up any doubts.
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Informal debt can also be approved for a house loan.
Although banks may reject house loan approvals based primarily on low income or excessive debt, in reality, "informal debt" is something that banks cannot verify unless the borrower discloses the amount of informal debt. This is because banks can only verify formal debts, such as house loans, car loans, land loans previously borrowed, and credit card debt. and the borrower's credit card spending behavior. Therefore, since informal debt is not submitted to the National Credit Bureau for verification, banks do not factor informal debt into their house loan approval decisions.
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Even if the bank approves a loan, if it's informal debt, we still risk being unable to pay off the mortgage.
The bank's inability to verify a borrower's informal debt, allowing them to approve a house loan, may not be a significant factor. Borrowers must be aware that if they are approved for a house loan, they will still be indebted to the bank and must meet the installment payments required by the bank. Ultimately, if a borrower still has informal debt, they will have to shoulder both informal debt and house loan payments each month. This creates a high risk of inability to pay, leading to a significant debt burden that could further impact their lives. The borrower could even face repossession of their house, while they will continue to be burdened with informal debt.
Informal debt does not affect house loan applications, but it directly impacts their ability to repay the installments. Therefore, if you truly want to apply for a house loan, it's best to do so safely and with minimal risk. Borrowers should clear all informal debt first. This could include planning to delay applying for a house loan and seeking advice from a bank. They can apply for a formal loan to clear all informal debt, allowing them to pay lower interest rates and greater security with formal banks. They can then plan their finances for applying for a house loan later. Of course, they can consult with their bank to find the best solution together.
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Article source: REIC
