At some point in life, we hit a phase that requires a great deal of money. For instance, an urgent medical treatment, marriage, or education, which compels you to take difficult measures to arrange the necessary finance. One way to meet your financial requirements is through a lap loan.
A loan against property is a secured loan, and most financial institutions consider the value of the property as the most crucial factor to sanction a loan. However, there are other factors as well that the banks take into account before approving or rejecting loan applications.
Here are 9 factors that affect loan against property eligibility
1. Flow of income
To be eligible for a lap loan, the applicant must have a steady income. He/she must have a regular job with a stable flow of income. It shows the bank that the borrower is capable of paying the loan amount with interest on time.
2. Repayment tenure
A longer tenure means you have the flexibility to repay in lower EMIs, and a shorter loan tenure can save you on interest payable. However, a repayment tenure depends on the age of the borrower. A young borrower can get longer loan tenure, whereas an older borrower will get shorter loan tenure.
3. CIBIL credit history
A positive CIBIL credit history is another loan against property eligibility. Lenders consider CIBIL credit history to determine the borrower’s payment capacity before approving a lap loan. Any default in payments could negatively impact your loan application.
4. Age of the borrower
Age is a crucial factor for a bank before approving a lap loan. For instance, if a borrower is close to his retirement age, the lender could reject the loan application outright. However, you might get the loan approved if you choose a shorter loan tenure.
5. Insufficient property document
Lenders do not approve lap loans if the property does not have a title and is pending approval by local authorities. The documents must include title deeds, building plans, and acceptance from relevant authorities.
6. Previous loan application status
Banks always keep a record of the previously rejected lap loan applications. It will reflect negatively on your credit profile If any of your previous loan applications were rejected, and hence, cause further rejection.
7. Property insurance
Insurance of the property, known as mortgage insurance, covers the loan repayment in case of an unfortunate event. So, it is wise to avail of mortgage insurance before applying for a loan against a property.
8. Job Stability
Another important factor that adds to a loan against property eligibility is the borrower’s job stability. Frequent changes in jobs by the applicant can get the lap loan application rejected.
9. Income Tax Returns
Lenders require the most recent 3 years income tax returns of the self-employed borrower. An adequate ITR shows adequate income, which is a crucial factor to determine the borrower’s loan against property eligibility. If the income tax returns show inadequacy, the lender will likely reject the lap loan application.
So, the property is the major component of a loan against property, but the said factors play a crucial role in your loan approval or rejection.