What is a Property Loan?
In times of financial need, having or owning a property can be a boon. A property loan is a loan you take by pledging your property as collateral. Getting such a loan is easy provided you meet all the property loan eligibility criteria. A property loan is one of the easiest ways of getting hold of funds when facing a financial crunch.
Business expansion, your child’s education, wedding or medical emergencies require lump sum amounts and maybe some of the common reasons for availing of a loan against property.
A property loan is a secured loan offered against any immovable commercial or residential property and therefore, property loan interest rates are lower than the interest rates on other types of loans.
However, borrowers must bear in mind that property loans are high-valued loans where any payment default can lead to the property being auctioned off by the lender to get back the loan.
Tips on How to Enhance Your Property Loan Eligibility Criteria
If you wish to enhance your chances of property loan approval, you must understand the various factors that affect loan against property eligibility.
Your Credit Score
Your CIBIL score or credit score is the most important criterion that lenders will check to judge your eligibility for any type of loan. Even while granting a secured loan like a loan against property, lenders do check the credit score of the applicant. A credit score is a numeric expression defining the past loan/debt repayment history of the loan seeker. The credibility of a borrower depends on this score. A CIBIL score above 750 enhances your eligibility for the loan.
Employment Status
Employment status and job stability for both salaried and the self-employed are important factors for sanctioning a loan by most lenders.
The number of years of association with the organisation and the salary of the applicant are assessed to ascertain the borrower’s ability to repay the loan.
People switching jobs frequently may get their loan application rejected as a frequent job change history negatively impacts the property loan eligibility criteria.
Source of Income
A stable and sufficient source of income is important for a lender to sanction an application for a loan. An applicant must maintain a stable job/business to earn a stable monthly income as it determines their ability to pay back the loan. However, if the loan EMI exceeds 60% of the monthly income of the borrower, the application is rejected. Thus, the source of income is an important eligibility criterion for a loan against property.
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Age of the Applicant
The age of the loan applicant is another barrier that one must cross to prove themselves eligible for a loan. Age is an important factor as one must complete the repayment of the loan before he/she reaches 60 years of age or retirement. For example, if your age is 55 and you are applying for a loan, then you can’t opt for a tenor that is longer than 5 years.
However, if the applicant is retired or will retire soon, the chances of the application being rejected are higher if the person opts for a longer tenor. In this case, it is advisable to go for a shorter loan duration or get a co-applicant to avoid missing EMIs and experience loan application rejection.
Property Documents
While availing of a loan against property, your property title should be free from any legal issues. The property papers are thoroughly checked by the lender. Your loan application may get rejected if your property is under any kind of legal dispute. The lender will check all the property documents, such as title deeds, approvals from relevant authorities, building plans, and other documents, as required before sanctioning the loan. If you wish to get your loan approved quickly, make sure you have all the documents ready.
Loan Tenor
For a short loan tenor, the EMI amount will be higher. In a longer tenor, your EMIs will spread over a longer period and this will result in smaller EMI amounts. To check your loan EMI, use the loan against property EMI calculator. It helps you to plan your finances. In the case your income is low and you want a loan for a smaller duration, your lender may reject your application.
Property Insurance
Along with the above-mentioned factors, the property against which the loan is applied must be insured. An insured property fosters a sense of security against the property and increases the property loan eligibility criteria, leading to quick sanction of the loan.
Summing Up
A loan against property is a comparatively easy and pocket-friendly way of availing of a loan. The property loan eligibility criteria is also simple but it comes with a risk on your property. While availing of a loan against property, you must remember the fact that while taking the loan, you are to submit your property documents to the lender.
If you are unable to pay off your loan due to any reason, the lender is authorised to sell your property to recover the loan amount. So, whenever you avail of a loan against property, you must make sure to be disciplined in your loan repayments.
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