Top 8 Factors Affecting your eligibility for Loan Against Property

• March 3, 2023October 23, 2024

When you need to get a loan against the property that you own, the first thing that you need to look at is the eligibility to get the loan. There are a number of factors that determine your eligibility and you should check out each and every one of them before you apply for the loan. This blog will look at each of these factors and help you understand them more in detail.

Taking a loan can be quite tough sometimes and one who needs money always looks for reliable credit options. In today’s world, credit options are easily accessible due to the growing ecosystem and network of government-accredited banks, small finance institutions, and credit companies. One such type of loan which is easily available to common people is Loan Against Property. Be it a marriage, education, home construction, or personal loan, it is one of the reliable borrowing options which comes in handy for you. Since this is a secured type of loan, you might not get through unnecessary hassles to get your loan approved.

How much money can one borrow through Loan Against Property?

The Loan Against Property may have different requirements and aspects when it comes to borrowing money. In most cases, a borrower is entitled to the loan amount of 40-70% of the property’s value. The different types of properties like- residential and commercial can be utilized as collateral for loans. While there are multiple factors that play a role in defining your eligibility for it, you must go through them to understand them thoroughly.

Factors affecting your eligibility for a Loan against Property

Here is a list of factors affecting eligibility for a loan against property:

1. Current employment status

Almost all banks and financial institutions will keep track of your employment history and income. This is done to determine your ability to pay the monthly installments. The amount of time you have worked for your organization can also impact the borrower’s credibility. This is because frequent job changes can make it appear like the borrower has a relatively unstable financial situation.

2. Documentation of your leveraged property

Any bank or other financial institution will first demand and scrutinize documentation related to the collateral property. Any errors in the documents or legal issues could reduce, if not remove, your chances of receiving the desired amount from the lender. Permissions from local authorities, building plans, environmental approvals, and other documents may be included in this.

3. Insurance of your leveraged property

This is a subset of the previous factor, yet it is equally significant. It will help your loan application if the property in question is insured. This approach will enhance trust between the lender and the borrower, as the latter will feel more secure that the property will not become a non-performing asset in the future.

4. Age of the applicant

If the applicant has already retired or is close to retiring, the loan will certainly be denied for obvious reasons. In such instances, it is usually advisable to have a co-applicant on board, which can be a family member who earns money, or to provide joint income proofs with them to reassure the lending authorities.

5. Credit score

In almost all cases where a borrower applies for a loan, the credit score will determine whether or not the loan is accepted. Most banks and lenders rely on credit scores reflecting how successfully you’ve been repaying your existing loans or credit card payments. The same is true in the case of a loan against property.

6. Regularity of Income Tax returns

Income tax returns may be an important part of your loan application process, as you will be asked to submit your income tax return documents for the previous three to four years, which will demonstrate that the borrower in question has a consistent cash flow over a long period. If the Returns documentation is insufficient, your loan application may be denied.

7. Tenure for the loan

If the tenure you want to repay the loan is comparatively short compared to your normal monthly income, your Loan Against Property application is extremely likely to be rejected. Always double-check that the tenure you’re considering corresponds to your monthly earnings and isn’t too low or too high. Several online tools or EMI Calculators are accessible these days to ensure that all of your calculations before applying for a loan are under what is required to get your application authorized by the relevant authorities.

8. Rejection of Past Loan Application

When you are applying for a loan, the credit profile check is performed and if there are any discrepancies in past loan applications then this is more likely to raise a red flag on the same. While applying for such loans, it is always important that you present the correct documents and information.

While now you might have got a better understanding of factors for Loan Against Property, it will help you get through the loan application is quite an easy way. These all factors really play a huge role in the approval or rejection of loan applications and it is always recommended that you take care of such aspects to get your loan approved.