Everyone needs funds to fulfil their personal or professional goals. While you can meet the financial requirement in different ways, taking a Loan Against Property can be the quickest and the most efficient method.
A Loan Against Property is a multi-purpose loan you can obtain from financial institutions by pledging your existing property as collateral. While the property acts as security for your lending institution, you are still the owner and can continue to occupy the premises.
A Loan Against Property (LAP loan) can fetch you up to 65% of the property’s market value. However, you need to fulfil the below-mentioned Loan Against Property eligibility criteria to obtain the loan.
Factors Affecting Your LAP Loan Eligibility
1. Age of the Applicant
Age is an important factor against which the lending institution will gauge your eligibility. A young applicant has a higher chance of getting the application approved quickly than a person approaching retirement.
Even in such cases, you can either apply for a shorter loan period or have a younger co-applicant on board to strengthen your application.
2. Credit Score
Your credit score is the numeric representation of your past credit behaviour. A score above 611 depicts you as a trustworthy borrower likely to pay the instalments in time. The credit score affects your eligibility and influences your interest rate on your LAP loan.
While you can still obtain a loan with lower scores, the terms of the loan may not be in your favour. So check your credit score before applying and takes steps to improve the score if it falls short of the requirement.
3. Property Documents
Since your property serves as the security for the lending institution, they will check and verify all the relevant property documents. The documents are title deeds, building plans, permission from relevant authorities, environmental clearances, etc.
Any legal loophole in these documents can cause a dampener on your prospect of securing the loan. So make sure all the property documents are complete and in order before applying for the loan.
4. Financial Profile of the Applicant
The primary requirement of a Loan Against Property eligibility is adequate income to cover the EMI.
All loan providers would like to ensure that the applicant has a stable source of income. For that, they will consider your present employment status, the salary you obtain every month, and any other additional income sources.
Further, loan providers also note how long you have been associated with the current organisation. A frequent job change might not leave a good impression as it reflects instability.
An ideal candidate is someone employed in a reputed public or private sector organisation with at least two years of work experience.
5. Tenure of the Loan
Always keep your loan tenure in sync with your monthly income for easy approval.
A longer loan tenure results in lower EMI because the repayment is spread over a longer duration. So this is an ideal option for individuals with modest incomes.
However, if your income is higher, you can opt for shorter tenure with higher EMIs and save on the interest cost.
6. Insurance of the Property
A property secured with insurance will be an added advantage during the approval process.
Mortgage insurance lowers the risk of both the borrower and the lending institution. Thus it will help instil higher confidence in your application.
7. Regularity of Tax Returns
Another vital component of the screening process is the regularity of your tax returns.
Most loan providers ask for the last 3 to 4 years tax returns in case the applicant is self-employed. It helps them cross-verify the truthfulness of their income claim and the adequacy and stability of their income.
So these are some key factors that can affect the eligibility of your Loan Against Property. Once you understand them, getting approved becomes much easier and hassle-free. So be sure to check the qualifying criteria and keep the necessary documentation ready for quick approval of your LAP loan.