A loan against property serves as one of the best ways to raise funds mainly because of its secured nature. Whenever individuals need a high quantum to meet big-ticket expenses, they inevitably turn towards secured loan variants, like loans against property. The cost of immovable assets keeps increasing with time, which automatically helps in getting substantial funds.
However, before getting into the process of applying for this credit option, one should also be aware of the aspects that generally influence loans against property eligibility.
Factors affecting loan against property eligibility
So, if someone decides to apply for a loan against property at 55, it is not possible for the applicant to opt for a tenor longer than 5 years. The loan amount generally depends on a number of factors, including the value of the property. Lenders offer 40-60% of the fair market value of the property the individual has pledged as collateral; however, that also differs depending on certain factors.
While the fulfillment of eligibility parameters is the basic requirement, one also needs to know which factors can affect them. For instance:
- Credit score
This numeric summary is a crucial component of mortgage loan eligibility. It represents a borrower’s creditworthiness, and based on that, lenders decide if it will be safe to sanction a high amount to that respective borrower. Generally, it is advisable to hold a CIBIL score of 750 and above to get faster approval from the lending institution.
Keeping a clean repayment record is possible only if all existing loans and credit card dues are paid on time. Similarly, a high-value mortgage loan influences the CIBIL score, especially when one handles it properly.
- Regular flow of income
Financial institutions also expect the applicant to have a steady source of income as that helps them to handle monthly installments smoothly. However, despite having a property that is worth a high value, one’s application might get rejected if he/she does not have job stability. Therefore, to make the process easier, one must arrange all the relevant income proof to ensure that he/she will be able to bear the EMIs and other financial liabilities.
- Age
This is another important aspect that requires equal attention from borrowers as based on that, they will be choosing the repayment tenor. As per LAP eligibility norms, a borrower needs to complete the loan repayment before retirement (60 years of age).
- Loan tenor
The repayment tenor one chooses has a lot to do with the loan against property eligibility. While opting for a longer tenor, one’s EMIs will be spread across longer durations, making the monthly installment more affordable. On the other hand, a shorter loan tenor might make EMIs comparatively expensive.
However, lenders expect borrowers to go for longer tenors since that reduces the chances of repayment defaults and brings more interest profits as well. Therefore, it is crucial to know the ideal tenor of your loan against property.
Borrowers meeting the basic parameters of loan against property eligibility not only get prompt approval from the lenders but also get access to pre-approved offers provided by lending institutions.
These offers are available on other secured loan options, like home loans, as well. Such pre-approved offers aid borrowers to expedite the loan application process. To check your pre-approved offer, you just need to submit your name and contact details.
While these factors can affect one’s LAP eligibility, failing to submit the necessary documents can also result in loan rejection. All the loan against property documents required during the application process are mentioned below:
For salaried individuals:
- ID proof (Aadhaar/PAN card)
- Address proof
- Latest salary slips
- All the documents of the property pledged as collateral
- IT returns
For self-employed individuals:
- Address proof
- ID proof (Aadhaar/PAN card)
- Bank account statements (last 6 months)
- Property documents
Apart from these documents, property insurance papers are considered extremely helpful in improving loans against property eligibility. On the other hand, one must also note that inadequate ITRs or the absence of other necessary documents can be harmful to one’s credit history as well.