India’s loan against property market is expected to grow at a CAGR of 14% in value terms by FY2026. This humongous growth is attributed to this financing’s affordable interest rates, no end-use restrictions and high-value loan quantum.
As more and more potential borrowers consider availing this financing option to meet their financial obligations, it is imperative that they know about loan against property eligibility criteria and the factors affecting the same.
What are the factors that affect your loan against property eligibility criteria?
A borrower needs to fulfil specific parameters before availing a loan against property. These eligibility parameters may vary according to lenders. However, the basic criteria remain the same. There are a number of factors that affects the loan amount one can borrow, including:
- Applicant’s age
The basic eligibility criteria that a lender considers before approving a loan against property loan application is the applicant’s age. For instance, if a borrower is retired or will retire soon, the chances of loan approval are low.
That said, it is not impossible for such borrowers to get approval. However, in this case, the lender may levy a considerable interest rate along with a few stringent terms and conditions.
Alternatively, individuals on the verge of retiring can also opt for a shorter loan tenor or get a co-applicant for hassle-free loan approval. However, one downside to a shorter loan tenor is that it results in higher EMIs. Regarding this, one can use an online EMI calculator for loan against property.
- Employment status
For both salaried and self-employed borrowers, job stability and employment status are key factors determining loan disbursal. Lenders ascertain borrowers’ repayment capacity by considering the number of years one is associated with a company and the monthly salary that one draws.
Consequently, if one is frequent in changing jobs, the chance of loan application rejection for that individual is higher. This is because frequent job changes leave a negative impact on an individual’s financial stability.
- Source of income
A borrower’s income source hugely affects the loan against property eligibility criteria. This factor is closely related to employment status. To obtain loan approval, an applicant must maintain stable employment along with a stable income. This will determine his/her ability to repay the loan amount within the tenor.
On average, if a loan’s monthly instalments exceed 60% of one’s income, the lender rejects the application.
- Credit/CIBIL score
The CIBIL or credit score indicates how efficiently an individual repays the existing debts and credit card payments. In short, this three-digit numeric value indicates the creditworthiness of a borrower.
So, before you apply for a LAP, make sure that you maintain a high credit score. Remember that late payments, default payments and check bounces can affect your credit score, which may hamper your eligibility to avail a loan.
- Documents of the property
Another vital parameter that affects loan against property eligibility criteria is the property documents. To avail a LAP in India, borrowers must produce authentic documents of the property.
Some of the common property related documents are building plans, clearances and registration papers. If a property is associated with any legal proceeding or the documents are not in proper order, there are high chances of facing loan application rejection.
- ITR (income tax returns)
Despite having a stable job, a high CIBIL score, and authentic property documents, a borrower’s loan application can face rejection due to a lack of ITR. A properly filed ITR for the previous 3 to 4 years indicates a steady source of income and increases the chances of loan approval.
- Insurance of the property
If the property features proper insurance, the borrower gets an edge in the loan application. This increases the lender’s trust in a borrower, as the lender knows that this property will not become an NPA (non-performing asset) in the future.
Keeping these points in mind will escalate the loan against property application procedure.
In addition, meeting/exceeding loan eligibility also facilitates several benefits for such borrowers. For example, various leading financial institutions across the country extend pre-approved offers that simplify and fasten the application process. These offers are available across varied financial instruments, such as a home loan and loan against property. Individuals can easily check their pre-approved offers by entering their name and contact details.
Apart from considering these factors, it is also crucial that prospective borrowers know the current loan against property interest rate. This is because interest rate hugely affects the affordability of a loan. You must be comfortable paying off a loan without straining your personal financial obligations.
After thoroughly contemplating the factors that affect loan against property eligibility criteria and interest rate, one should move ahead with the application procedure.