Nowadays lending and borrowing is a common part of everyone’s lives. People have many dreams to fulfill, and they do not let insufficient funds to stop them from achieving it. One of them is loan against property.
As we all are living a life where everyone wants to fulfill their desires and don’t want to fall short on funds to stop them from creating and achieving various milestones.
It is an ideal way of borrowing funds and without any necessary aspect or restriction for which they can be utilized. They also provide funds with a lesser amount of interest rate.
It is obvious that one must own property in order to apply for a loan against property. But there are various other things like your CIBIL score, income source, and so on that affects your loan against property eligibility.
Getting a loan against property is one of the easiest way to get funds that is available to an individual. The most important thing or advantage is that there is no restriction on how one can utilize the amount borrowed by loan against property.
One can use it either for personal requirements or business requirements; it entirely depends on the borrower. Another, plus point is that under loan against property one can borrow large funds on a much lesser interest rate.
But before applying for a loan against property one must take a look at factors which may affect your loan application. Let’s take a look at 5 factors that affect your loan against property eligibility.
1. Your Income Source
The lender ensures that the borrower has a repayment capacity to manage to pay the EMI or equated monthly instalment. For this, the income source of the borrower is considered as one of the key factors.
Even though your property is high in value, but you are not capable of paying off the EMIs of the loan against property because there is no necessary income source. Then the lender will not approve your application. For instance, for banks (most of them), the EMIs should not be more than 60% of the borrower’s income.
2. Valid Property Documents
The borrower must pay attention to the property documents. One should check that all the documents are in order, complete and valid before he/she applies for loan against property.
The borrower must provide documents like building plan, approval from relevant authorities, title deeds, registration, and so on. If there is any legal issue against the property, the loan is rejected.
Also, one must check the documents thoroughly and make sure that they are listed as the owner or the co-owner of that property before applying for loan against property.
3. Your Credit Score
It is one of the most important factors on which an individual’s application for loan against property is judged on. People consider that credit score is just a necessary criterion for the unsecured loan. But on the contrary, it is also one of the most critical factors of secured loan like loan against property.
The borrower’s credit score reflects his/her repayment capability. It indicates whether or not the borrower will be able to make regular payments on their loan. Generally, banks to approve your loan application look for a CIBIL Score of 650 or above.
4. Insufficient ITRs
The lenders require the borrower to submit their ITRs (Income Tax Returns) before they approve their loan application. It depends on the lender, like for instance generally in most cases the lenders ask the borrower to submit past three years income tax returns along with other necessary documents.
Even if the borrower has a good income source, a good CIBIL Score, valid documents, etc. but if there is insufficient ITR, Then it becomes tough for the borrower to raise funds through loan against property.
Thus, income tax returns to the lender is an essential factor that affects your loan against property eligibility. Also, if the borrower has not filed for their income tax returns, then it is a challenge for them to get any kind of loan approved.
5. The Age of the Borrower
The age of the borrower is fixed for Loan against property. Generally, the borrower should be more than 21 years of age and less than 60 years of age.
Also, most of the banks, as per their rules have made it mandatory that the borrower must repay their loans before attaining the age of 60 years. For instance, if the age of the borrower is 54 years old, then he/she must repay the loan amount within the tenure of 6 years.
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Also, if the borrower does not have the necessary income source and capability to repay the loan amount within the tenure, then the application is rejected.