How to Apply for Loan Against Property without being Rejected

Loan Against Property, often abbreviated as LAP and synonymous with the term mortgage loan in India, is an effective tool for those seeking financial assistance. It gives people access to a substantial amount of money for a long period at highly nominal interest rates. Further, a loan against property is one of the only few loan options the funds availed under which come with zero restrictions. To explain further, one can use the money as they please - they can use it to pay for a medical emergency, pay for a child's wedding, clear their existing debt or even take a luxurious foreign vacation. These reasons have made LAP an incredibly popular financing tool. However, not everyone who applies for LAP gets approved for it. So, why do loans against property applications get rejected and what can one do to avoid rejection? Read on to know the answer.

Reasons for Against Property Applications Rejection and Tips to Avoid It

Issues with the Property Pledged as Collateral

In India, property disputes are not all that uncommon. In fact, it is common for family members to dispute ancestral property. Similarly, sometimes, property owners raise structures without seeking permission from the concerned authority. This leads to properties being deemed illegal. Lenders do not sanction loans against illegal or disputed properties. Similarly, they also do not want to sanction loans against old properties as the risk involved for the lender is much higher in the case of properties that are old and in bad condition.

# Tip 1: If you do not want your loan against property application to get rejected, make sure the property you are pledging as security is legal and free of any kind of dispute. Further, try and make sure the property is no more than 15 years old.

Bad Credit Score

You may think that the security or collateral should be enough to convince a lender of a borrower's repayment capacity. However, loans against property involve a substantial amount of money and therefore, lenders want to do everything to make sure they are lending money to someone who will be able to repay it on time. To ascertain a borrower's repayment capacity, lenders check their credit score. To be eligible for the best loan against property deals, borrowers must have a credit score in the range of 750 to 900. Anything below 750 will lead to LAP offers involving high rates of interest and other unfavourable terms and conditions

# Tip 2: If you wish to avail of a loan against property, get in touch with one of the credit information bureaus and request your credit report at least six months in advance. This way, if your credit score is below expected, you will have ample time to take corrective measures. Practice rigorous financial discipline: do not apply for new loans and pay off some existing ones and pay all your EMIs on time to bring your credit score up to the mark.

Income Instability

As mentioned before, lenders offer the best loan against property deals to individuals who are least likely to default on loan payments. A stable income and stable job assure lenders of a borrower's repayment capacity. Individuals who switch jobs often come across as risky borrowers to lenders. Lenders, therefore, often reject their loan applications. Similarly, most lenders also have minimum income eligibility requirements based on the city in which the borrower lives. The inability to meet this income requirement leads to loan against property rejection.

# Tip 3: To avoid home loan application rejection, maintain income and job stability. Do not switch jobs often. Make sure you meet your lender's minimum income criteria before beginning the application process. If your income does not meet the minimum income requirements, add a co-borrower to your loan against the property application. However, make sure this co-borrower has an impeccable credit score and stable income. Taking these steps will certainly help you avoid rejection.

Incomplete Documentation

Loans against property are big-ticket loans and therefore, lenders go the extra mile to ensure they will get their money back on time. This is why lenders ask for several different documents, such as KYC documents, proof of income documents and all documents related to the property being pledged as collateral. Improper and inadequate documentation leads to loans against property rejection.

#Tip 4: Before beginning the loan against property application process, go to your lender's website and check the list of documents you will need to attach with your loan against property application. Before beginning the application process, make sure you have all the documents ready with you.

Not Meeting the Eligibility Requirements

All lenders have specific eligibility requirements concerning borrowers' nationality, income and age status. For instance, most lenders do not sanction loans to non-resident Indians. Similarly, most lenders do not sanction loans to borrowers under 21 years of age and above 70 years of age. If you do not meet your lender's eligibility requirements, your loan against property application will get rejected.

# Tip 5: Before beginning your loan against property application process, go to your lender's website and see their eligibility requirements. Apply only if you meet your lender's eligibility requirements.

You Have Been Rejected for a Loan in the Past

When you apply for a loan against property, your lender will do a background check on you. They will see if you have been rejected for a loan in the past. If you were ever rejected, your lender might hesitate to sanction a loan to you.

#Tip 6: If you have been rejected in the past, the best thing you can do to avoid rejection is to make sure your credit score is at least 750. This will instil your lender's confidence in your repayment capacity.

High Existing Debt

Lenders sanction loans to borrowers whose FOIR or fixed obligation to income ratio is under 40%. In other words, only 40% of a person's income should be going towards clearing EMIs, credit card bills and other existing debt. When a person's debt obligation is higher, lenders doubt their ability to repay the loan.

#Tip 7: If you have too many loans running at the same time, try and clear a few loans before availing of a loan against property. This will convince your lender of your ability to repay your loan on time.

Final Words

If you own a property, a loan against property would be the ideal way to arrange for the money, especially in case of a financial emergency. However, borrowers must keep in mind that not everyone gets approved for LAP. Keeping the above pointers in mind will help you enjoy quick approval and beneficial loan terms and conditions.

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