There may be times where an individual does not have the required funds for certain expenses. These could include wanting to start a business, pay for a wedding, or even covering medical bills. Now, if you do not wish to use up your savings for these expenses, one effective way to deal with them is to apply for a loan against property. One can get this secured loan by providing collateral to the lender.
Before applying for this loan, it is important to be aware of the loan’s eligibility criteria. Lenders determine an applicant’s eligibility for a loan against property based on certain factors. In order to get a suitable loan plan, you need to be aware of them before speaking to a financial institution.
So, look at 7 factors that affect your loan against property eligibility:
- Loan tenure
By choosing a longer tenure to repay the loan against property, you will pay smaller monthly instalments. Now, this increases your repayment capacity, which improves your loan eligibility. So, when you apply for loan against property, make sure to choose a tenure where the lender can trust your repayment capacity.
- Property insurance
If the property being pledged as collateral is covered with mortgage insurance, it can give a boost to your loan application. Since this can lower the lender’s risk of providing you with a loan, it improves your eligibility.
- Credit rating
One of the most important factors that a lender takes into consideration while determining an applicant’s eligibility for a loan against property. This is why it is so important for you to maintain a good credit score (750 or above) to improve your loan eligibility.
- Age of the applicant
If the applicant will reach the age of retirement before the loan tenure ends, they might face problems in paying off the monthly instalments with no active income. This is not a preferable situation for a lender, which is why you should make sure to take a loan where you can repay it before reaching the stage of retirement.
- Multiple loan application rejections
An applicant having too many loan applications rejected is a negative sign for a financial institution. This indicates that they are always in need of credit and are failing to meet lenders’ criteria. Avoid having any applications rejected in order to keep a clean slate for future lenders.
- Property documents
It is important to keep all the property documents such as the building plans, environmental clearances, permits from local organisations, etc. for the lender to review. If everything is in place, the loan approval will be a smooth process.
- Steady monthly income
Only when an applicant has a steady employment record and a fixed monthly income will they be able to smoothly pay off the loan. This is why having good job stability is an important criterion while applying for a loan against property.
Therefore, these factors that affect your loan against property eligibility need to be kept in mind before applying for a loan. Also, make sure to use a loan against property EMI calculator to understand whether the loan plan’s EMIs are affordable.