Things That Affect Your Eligibility for a Loan Against Property

Getting a Loan Against Property may seem like the easiest option to fund any financial requirements that you have. The biggest advantage with these loans is that there is no restriction on the end use of the loan amount that you get. You may use it for just about any personal or business requirements. The advantage of these loans is that you can get large loan amounts with a much lesser interest rate.

With a loan like HDFC Bank Loan Against Property, it may seem like getting a loan is very easy because you are providing an item of significant value as collateral. However, several factors can affect your eligibility for a Loan Against Property, such as:

1. Your credit score:

This is the most important criteria for any loan that you choose. While most people consider credit score as a necessary criterion only for unsecured loans, the fact is that this score is considered even with a secured loan like a Loan Against Property. A credit source reflects your repayment history. This creditworthiness shows whether you will be able to make regular repayments on your loan. Banks will ensure that your CIBIL score is high (650 or above) before you can apply for a loan.

2. Your income source:

Even with your property as collateral, with HDFC Loan Against Property, the lender ensures that you have the repayment capacity to manage your equated monthly instalment (EMI) payment. It is possible that you will not be eligible for a Loan Against Property even if you have a property that is high in value but you do not have the necessary income. With most banks, the EMI should not be more than 65% of your income. If not, you will not be eligible for the loan that you have applied for.

3. Valid property documents:

All the property documents must be in order and should be complete for you to be eligible for the loan. There are several documents like the building plan, the title deeds, approval from any relevant authority, registration and a lot more that you will have to provide to your lender. In case there are any legal issues pertaining to your property, the loan is usually rejected. You must also ensure that you are listed as the owner or co-owner in all the property documents that you submit for the processing of a loan.

4. The loan tenure that you apply for:

You have great flexibility when it comes to the tenure of your Loan Against Property. This means that you have the option of choosing a longer repayment tenure or a shorter one. The tenure may go up to 15 years for these loans. However, whether your loan will be approved or rejected depends entirely on the tenure of the loan versus your current income. If you have a lower income, then applying for a longer tenure means that you will be more likely to make regular repayments towards the loan. However, if you have a low income but are looking for a short term loan, it may not be approved.

5. The age of the borrower:

There is a fixed minimum and maximum age when it comes to a Loan Against Property. The borrower should be at least 21 years old as per the rules of most banks. The maximum age is usually 60 years. With most banks, the terms and conditions of the loan include repayment of the loan before the borrower is 60 years old. So, if you apply for a loan when you are 55 years old, you can only have tenure of up to 5 years. If you do not have the necessary income to support this loan tenure, your application will not be approved.

6. The applicant’s job history:

The nature of your job plays a very important role. For professionals and self employed individuals, the stability of the industry that you are is taken into consideration. For those who are salaried, changing jobs regularly is usually considered a negative factor. Salaried individuals must be employed in the same company for at least 2 years to make them eligible for a loan. Frequent job changes are also a reflection of an unstable job or career.

7. Insurance of your property:

Along with the value of your property, the insurance that you have obtained for it also matters. In order to get a Loan Against Property, you must have the property insured. Having an insurance reduces any risk for the lender as well as the borrower in case there is any unforeseen incident. Loan repayments are covered by property insurance plans to ensure that there is no burden on your family in case of any unfortunate situations in the future. It is also a good idea to obtain insurance on your property to secure your own financial interests.

8. Rejection of any loan applications in the past:

All the credit bureaus and financial institutions have a track of your loan applications. If any loan has been rejected in the past, the chances of you getting a new Loan Against Property also reduce. This rejection of a loan is reflected as a negative remark in your credit history. This is why most financial experts suggest that you only apply for a loan when you really need to. You must also check your eligibility thoroughly to avoid any issues with your credit history because of loan rejections.

9. Insufficient ITRs:

Whether you are a salaried individual or a self-employed individual, you will be required to submit your Income Tax Returns (ITRs) in order to purchase a loan. In most cases, you will have to submit ITR of the last three years along with other Documents Required for Loan Against Property. Even with a good income, having insufficient ITR makes it hard for the lender to have check if this income is regular or not. Therefore, providing your ITR is a must. If you have not filed for Income Tax Returns, getting any type of loan can be a challenge.

Also Read: 5 Rules to Follow When Getting a Loan Against Property

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