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Top 7 Factors Affecting Your Eligibility For Loan against Property Research Team | Posted On Tuesday, March 05,2019, 06:32 PM

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Top 7 Factors Affecting Your Eligibility For Loan against Property



Loan against property is where the borrower avails a loan, by pledging property as collateral, for the loan availed. The value of the property decides the amount of loan an individual can avail. A loan against property can help you borrow a large amount of money at affordable interest rates. However, there are various factors that can affect your eligibility in obtaining secured loans like LAP.

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See Also: Why take a loan against property

Top 7 Factors Affecting Your Eligibility For Loan against Property 

Given below are top 7 factors that determine your eligibility and help you get secured loans from banks:

  1. Credit score: The banks consider credit score as an important parameter for sanctioning loan against property. The banks do not approve the loan application, if the candidate’s credit score is below a certain number. The credit score is an important factor for not only getting unsecured loans, but also obtaining secured loans. Credit score represents the credit worthiness of an individual. It is repayment history and ability to manage debt. A credit score of 700 and above is considered to be good score for getting your loan sanctioned.
  2. Income source: the applicant must have a stable source of income that determines the monthly repayment capacity of the borrower. Even if you avail loan against property, your monthly income plays a vital role in sanctioning of the loan. Your monthly income determines how much you can pay as EMIs. The applicant must have a stable job or business for steady income. It is also important to note that most banks sanction an amount, where the EMI does not exceed 60% of your monthly income.
  3. Documents of the property: if you want to avail loan against property, you must make sure that all your property documents are authentic and valid. As you pledge your property documents as security with the bank, make sure all the documents are in order. Documents like registration papers, building plan, and occupancy certificate must be signed and approved by relevant authorities. Your property documents are crucial for the banks to decide whether to approve the loan or not. In case the banks find any incorrect documents or legal issues pertaining to the property, then your loan application is likely to get rejected.
  4. Tenure of the Loan:  Loan against property helps avail loan for a longer tenure. As it is a secured loan, the bank generally lends the money easily and the borrower has the option to choose the repayment tenure. Loans against security can be availed for a short period or for a longer period of up to 20 years. The sanctioning of your loan depends on the amount of loan you borrow and your current income. An applicant with higher income can opt for greater loan amount and shorter tenure of repayment. An applicant with lower income must opt for a longer repayment period; else the loan application may get rejected.
  5. Age of the applicant: The banks have certain rules and guidelines when it comes to sanctioning loans. There is a specified minimum and maximum age when it comes to sanctioning loan against property. A borrower must be at least 21 years of age to avail loans. However, the maximum age to secure loan against property is 60 years. Most of the banks have guidelines to repay any kind of loan before the borrower attains the age of 60 years. Age is an important criterion that determines whether your loan application gets sanctioned. So, if you are availing a loan just a few years before retirement with lesser means to support your loan, then it is likely that your loan application get rejected.
  6. Employment history: The applicant must have job stability and must work in an organisation for a certain number of years or be involved in business for some years with profits. The kind of job also plays an important part in determining eligibility. For both salaried and self employed, job stability in their respective professions is considered a key factor for sanctioning of loans. For salaried professionals, changing jobs often is considered to be negative.
  7. The property insurance: When you buy a property or a car, you generally avail insurance. The property insurance provides insurance cover for the assets and helps recover the money in case of any damage or perils. So, if you want a secured loan, make sure you have property insured.

Property insurance reduces the risk for both the borrower and the lender in case there is damage caused by natural or manmade perils. Loan repayments are covered by property insurance to ensure that there is no burden on your family, in case of any unfortunate event. It is also a good idea to obtain insurance on your property, to secure your own financial interests.

See Also: Loan Against Property Interest Rates

Your property is a great asset that you can pledge to the bank, to secure long term loans. You can utilize your property to get loans for business growth or to fund emergency expenses. Make sure not to borrow money that is beyond repayment capacity. Make sure to make regular payments, else your debt piles up leading to the debt trap.

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