A loan against property is a high-value financing option for all kind of financial needs. The loan can be availed using property as collateral, which makes this a secured loan. Through a loan against property, owners pledge the property with the lender to receive a sanction.
Apart from the mandatory property ownership requirement, lenders have specific loan against property eligibility criteria. Based on these eligibility factors, the loan application is assessed and approved.
Below are 10 factors that determine your eligibility for a loan against property. These factors also influence the loan amount, interest rate, loan repayment tenure, and so on.
Income factor: While property is pledged as collateral to avail of a loan against property, borrowers are still expected to submit income proof. Lenders assess the repayment capability of borrowers on the basis of their income, among other factors. Those who have a high-income with many more years in the work force are preferred by lenders because this increases the repayment capacity of the person and reduces risk for lenders. Most lenders do not approve the loan in case the minimum income eligibility criterion is not fulfilled by the applicant. This minimum income criterion differs from lender to lender. Usually, this remains in the range of Rs.25,000-35,000 per month for most lenders.
Salary income: For salaried individuals, lenders take into consideration the take-home salary. The income from salary determines the total loan amount that can be sanctioned. Also, the maximum age limit generally is up to 62 years for salaried individuals for loan approval.
Self-employment: The maximum age limit can go up to 70 years for self-employed individuals. In the case of these applicants, lenders assess the steadiness of the business by reviewing historical financial records that showcase profits and losses. Most lenders expect applicants to be engaged in the same business for the last 5 years.
Age factor: The age of the borrower directly affects the provisions of a loan against property. If your age is on the lower side, getting a higher repayment tenure is possible. Those nearing their retirement or have retired may not get the approval for a loan. Different lenders may have different criteria related to age. To be eligible for the loan, the standard age bracket is between 25 to 70 years, which is followed by most banks.
Residence factor: For availing a loan against property, it is mandatory to be a resident of India and own a property in India. Additionally, some lenders only approve loan against property to owners who live in particular cities.
Credit history: The repayment history of the previous loans availed of by the applicant reveals the creditworthiness. If the applicant has defaulted on loan repayment, lenders become cautious. On the contrary, if loans have been repaid before the scheduled time, this works in the favour of the applicant.
Credit score: Financial institutions check the credit score of applicants. A good credit score can easily convince lenders to approve the application. Also, a lower loan against property interest rate may be offered to individuals with a good credit score. A CIBIL score of 750 or more is considered good for the purpose of availing of a loan against property.
Existing liabilities: Knowing the existing EMI liabilities of the applicant can affect both the chances of approval and the loan amount. If the existing EMI amount goes beyond 70-80% of the applicant’s monthly income, lenders may reject the loan application.
Ownership of the property: A loan against property is offered only to the owner of the property. So, as an applicant, you are required to furnish the documents to establish yourself as the owner of the property. Disputed ownership can result in the cancellation of the loan application.
Value of the property: This affects the loan amount you are eligible to borrow. The current market value of the property is determined and accordingly the loan amount is decided. Up to 70% to 75% of the current value of the property can be sanctioned as the loan.
Property loan comes with the valuable feature of balance transfer. If you have already availed of a loan against property, opting for a loan against property balance transfer and transferring your loan to a different lender can help you reduce your existing interest liability. Additionally, on the existing loan, you can make a request for a top-up as well if you require additional funds. Before choosing loan against property balance transfer, with the use of loan against property EMI calculator, you can perform all the calculations to know the new EMI liabilities.
With the above-mentioned loan against property eligibility criteria in mind, you can carry out a self-assessment. Through this, you not only minimise the probability of loan application rejection, but also speed up the loan approval process.