Whether you need to start a business, improve your lifestyle or pay for a medical emergency, a substantial amount of money is required, which your savings might not be able to cover at all. An efficient way to deal with such planned and unplanned expenses is opting for a loan against property by pledging your residential or commercial property as collateral to obtain the necessary funds without any needless limitations.
Offered at an affordable property loan interest rate by various financial institutions, a loan against a property requires a thorough background check of the candidate before the approval. While the loan against property interest rate differs from one lender to another, the eligibility factors remain the same, more or less, for all the lenders, including the candidate’s age, credit rating, income, property documents, etc.
Read on to know in detail about the top 8 factors affecting loan against property eligibility.
- Age of the candidate
A key factor considered by the financial institutions before offering the loan is the candidate’s age, which determines their ability to repay the debt before retirement. While the minimum age for filing a loan application is 21 years, the borrower’s age should not be more than 65 years in case of a loan against the property so that he or she could repay the loan amount without any interruption. If the borrower has attained his retirement age, the lender will not approve the loan application.
- Nature of work
Another essential aspect that the lender relies upon while providing a loan against property interest rate is the borrower’s income source. If the borrower is a salaried professional in a government institution or an MNC, the lender is completely satisfied with the lender’s job profile. Similarly, if the candidate is a self-employed individual with stable profit margins, the lender is more than happy to provide the loan. However, if the lender cannot establish the borrower’s steady source of income, the property loan application might be rejected.
- Monthly income
Even if the borrower has a stable job at an MNC or government institution, it does not guarantee a loan approval until the lender is satisfied with the income to expenses ratio of the borrower. They need to be sure they would be able to repay the loan with their monthly salary. Usually, the lender restricts a borrower’s EMI amount to 35-45% of his net income. If the home expenses and ongoing debts go beyond the set limit, the property loan application shall not be approved.
- Credit History
A good credit score of 700 or above demonstrates an efficient debt-handling and repayment capacity of the borrower. Analyzing the credit history is one of the most critical factors assessed by the lenders while performing background checks of the borrower’s ability before sanctioning a loan against property. Suppose the borrower has failed to deposit regular EMIs of previous loans or pay the credit card bills on time. In that case, it shall be reflected on the credit score of the borrower, and the lender would not approve the loan application at any cost.
- Property documents
Another key eligibility factor to emphasize upon while applying for a loan against property is the documents related to the property, such as the title deeds, building plans, approvals from relevant authorities, registration, etc. The borrower must ensure that all the property-related documents are in order before proceeding to the financial institution. Any default in them will also lead to the rejection of the loan application.
- Property Insurance
While mortgage insurance cover helps decrease the financial burden, it could also play a crucial factor in improving your odds for sanctioning the loan. Since mortgage insurance helps damage control in case of any mishap, it could prove to be an asset in increasing your chances of impressing the lender for a property loan.
- Loan rejection history
While performing the verification formalities, if the lender comes across your previous rejected loan applications, it might also lead to rejection of your current loan request due to low creditworthiness.
- Property value
Last but not least, the sanctioning of your requested loan amount also depends upon the value of your property based on its age, location, size, and several other factors. The lender shall perform the complete evaluation of the borrower’s property before making a final decision and accepting your loan application.