A loan against property is a secured loan offered by banks and non-banking financial companies. It is one of the most popular ways to address financial requirements such as wedding, travel, education, home renovation, car repair, or business investment without causing much financial stress. Compared to unsecured loans, it comes with lower interest rates and higher loan amounts. It enables the borrowers to repay the loan within stipulated EMIs.
However, before applying for a loan, it is imperative to check the loan against property eligibility which depends on current property value, income, age, credit score, repayment tenure, and current financial obligations.
Here are the factors affecting the loan against property eligibility:
- Income
It is the most crucial aspect of a loan against property application. It indicates the borrower’s repayment capacity. The higher the income, the better are the chances of securing a loan against property. So, to be eligible, it is imperative to have a steady income. A regular job with a steady income ensures the approval of a loan.
- Loan tenure
The repayment tenure has a direct impact on the loan against property eligibility. It is the time frame you commit the lender to repay the loan. Depending on the lender, you may get up to 15 years to repay the loan. But, keep in mind that a longer loan tenure brings a higher interest rate with it, and shorter loan tenure can save you on interest payable. Also, a repayment tenure depends on the age of the borrower. A young borrower can get longer loan tenure to repay the loan.
- Credit score
Another factor affecting the loan against property eligibility is the CIBIL score. It is a three-digit number that indicates the borrower’s creditworthiness. The lender checks the borrower’s credit score before approving the required loan. The minimum CIBIL score required to get a loan against property is 750. The higher the credit score, the better are the chances of getting a loan at a lower interest rate and other favourable terms and conditions.
- The borrower’s age
As mentioned earlier, a loan against property eligibility also depends on the borrower’s age. For instance, if the borrower is close to his retirement age, the lender will reject his application for a loan. Even if they do so, they will have to repay the loan amount with interest within a short period.
- Loan against property documents required
The loan approval depends on the loan against property documents required by the lender. If the borrower’s property does not have a title and is pending approval by the local authorities, the loan application will likely be refused. Before applying for a loan, make sure you have documents such as title deeds, building plans, and acceptance from relevant authorities.
- Previous loan application status
It is worth pointing out that banks record the previously rejected loan against property applications. So, if any of your previous loan applications were denied, you will struggle to get a new loan against property. So, before applying for a loan, make sure you have a clear history of loans.
- Property insurance
Borrowers who have insurance for the property are highly likely to get approved for a loan. The reason is that the insurance policy covers the repayment of the loans during unfortunate events. So, if you wish to get a loan against property, make sure to get mortgage insurance before submitting your application.
In short
Getting a loan against property is the best way to manage your finances if you have a large or small property to the mortgage. However, the loan eligibility depends on factors, such as age, income, credit score, loan tenure, home insurance, etc.
