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9 Factors That Affect Your Eligibility for a Loan Against Property Research Team | Posted On Wednesday, June 12,2019, 05:32 PM

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9 Factors That Affect Your Eligibility for a Loan Against Property



Loan against property is an easy way to avail a bank loan. As it is a secured loan the bank considers the value of the property as an important factor while sanctioning the loan. However, banks or lenders also consider other factors while approving or rejecting the loan application. Listed below are some of the factors that have a profound impact on loan against property.

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1. Loan Tenure:

A longer tenure helps avail the loan against property rather easily, along with a lower monthly EMI. On the other hand, a shorter tenure helps save on interest, but the amount sanctioned would decrease. Banks determine the tenure of your loan against property based on your age. A young borrower is eligible for a longer tenure, whereas an older borrower gets a shorter tenure as banks try to close off the loan before retirement.

2. Age of the Property:

Banks have strict guidelines vis-à-vis the age of the property. If the property is too old, then a lower amount is sanctioned as the market value of such a property is lower. However, a property that is in good condition helps get the loan against property, sanctioned easily.

See Also: Differences Between Home Loan And Loan Against Property

3. Income Tax Returns:

Banks make it mandatory for the applicant to provide the last three years income tax returns or ITR.

4. Income Flow:

Important eligibility criteria specified by the bank is steady income. An applicant must have a stable job and a steady flow of income to get the loan approved. This shows the bank that you are capable of paying the monthly EMIs and will not default on payments. The risk of default is negligible, if the applicant has a good income. Otherwise, the lender would be forced to sell the mortgaged property.

5. Mortgage Insurance:

mortgage insurance is an added advantage, as the property used as collateral is already insured.

See Also: Mortgage Loan Interest rates, Eligibility & Calculator

6. Interest Rates:

the interest rates on the loan against property or LAP are of two types – fixed interest rate and floating interest rate. When you apply for LAP the bank offers you the choice of interest rates. A fixed interest rate remains the same across the tenure of the loan and the borrower has to pay the same EMIs. In the floating interest rate, the interest varies depending on the market fluctuations and this is useful if RBI cuts the repo rates.

7. Co-applicant:

A co-applicant is a second borrower apart from the main borrower who cosigns the loan along with the main borrower. A co-applicant can be anyone i.e. spouse, parents, relatives, children or a friend. People with low credit score avail loan against property by adding a co-applicant. This increases the eligibility of the borrower and he/she is eligible for higher loan amounts. However, a co-applicant must also furnish the documents required by the bank. He is equally liable for the loan against property.

8. Charges on the Loan:

Besides interest, the lender also charges various other fees like processing fees and GST which must be borne by the bank. The bank also charges loan renewal fees and pre-closure charges. You must inquire on the various fees in advance and decide if you want to avail the loan from the particular bank.

See Also: Documents for a Loan

9. Patta:

A borrower must furnish authentic documents to prove ownership of the property. The borrower must also submit the title deed of the property as only the Patta is insufficient to prove ownership. A LAP is only sanctioned if the borrower is the owner of the property.

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