Factors That Affect Loan Against Property Eligibility
Properties, be they residential or commercial, are among the biggest assets most of us own. Homeowners usually put in a lot of effort, time, and money to buy properties as lifetime investments, and while some people rent out these assets to generate revenue, others use them to finance personal needs.
A Loan against Property, or LAP, is an easy way to avail of emergency funds. Moreover, one can use the credit for any purpose of their choice, including business expansion, wedding expenditure, university fees, medical emergencies, and so on. A loan against property is a secured type of loan where a property remains as collateral with the lender until the borrower repays the loan amount.
Loan against property is an attractive option when one is in need of a large amount of funds, especially because loan against property interest rate is lower than the interest rate applicable on a personal loan.
Like in the case of any loan, it’s best to understand eligibility and other factors before applying for a loan against property. Some factors that affect loan against property eligibility are mentioned below.
Top Factors That Impact Loan Against Property Eligibility
The Borrower’s Age
If the loan against property applicant has retired or is nearing the age, chances are that the loan will get rejected. It is advisable that in cases such as these, the borrower applies with a co-applicant – an earning member of the same family. This will also help showcase higher income, strengthening your application.
As a secured loan, a loan against property is easy to avail for most borrowers. But it’s important that borrowers carefully consider how much funding they avail of and plan repayment beforehand so as to safeguard their property in the future.
The Borrower’s Credit/CIBIL Score
In all scenarios where a borrower applies for any type of loan, the credit score plays a crucial role in whether the application is approved or rejected. All lenders review a borrower’s credit score before furthering the application, since it shows how well an applicant has been servicing existing loans.
Source of Income
Financial institutions consider a borrower to be eligible for a loan against property if they have a steady source of income. They give more importance to salaried individuals and professionals such as doctors and chartered accountants since they typically showcase steady monthly income.
Loan Tenor
A loan against property application will likely get rejected in case the loan tenor is too short for the applicant, given the tentative EMI and their average monthly income. Thus, borrowers must always make sure that the loan against property tenor they seek is in line with their repayment capacity.
The tenor must neither be too long nor too short. With the help of online tools such as a loan against property EMI calculator, applicants can decide on a comfortable EMI and the respective tenor before applying for funding. The borrower should also check the loan against property documents required to have everything in place before applying.
Current Employment Status
In case of salaried individuals, all financial institutions check a borrower’s current employment status and salary to assess their capability to repay the monthly equated monthly instalments (EMIs). Another factor that can influence the credibility of an applicant is the credibility of the employer. Those working with large, reputed organizations are typically offered better borrowing terms.
Insufficient or Incomplete Property Documents
Documents associated with the property to be mortgaged must be shared with the lender. The documentation process typically involves verification, and you must be able to service all necessary documents, such as the title deed, building plan, and other documents the lenders may request. Lenders check these documents to ensure that the property to be used as collateral has a clear title and is free of any legal encumbrances before sanctioning the amount to a borrower.
Lack of Proof for Business Continuity
In case a borrower is self-employed, lenders ask for proof of business continuity since income regularity in such a case is directly dependent on the business. Most lenders seek a business continuity of 5 years in the current enterprise, failing which the application may be rejected. Of course, this number can vary from lender to lender. Other documents such as the ITR also hold weightage, so it is important you have documentation in place before initiating the process.
The Final Word
Repaying a loan against property can be far less stressful if one plans repayment well in advance with the help of tools such as a loan against property interest rate calculator. Borrowers should estimate their monthly outgo with a loan against property interest rate calculator and plan their expenses and repayment accordingly to ensure affordability in the long term.
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