Factors You Should Know That is Affecting Your Eligibility for Loan Against Property

Did you know? There are many ways to get a loan. But getting a loan of any kind is a cumbersome task. Bankers and lenders go through a lot of checklists. Usually, banks have a set of guidelines to follow while releasing a loan amount.

And the guidelines and Standard Operating Procedure (SOP) are followed by banks as per Reserve Bank of India (RBI) loan policies. It is to be noted that loans can be of different types. For example housing loans, car loans, business loans and so forth.

Hence, a loan is generally given by banks against your property or an asset. A loan against property is one of the most common and easy ways to get a bank loan. Banks consider it as a secured loan. So, banks decide the value of the property at market price. And then avail a certain percentage of the property value as a loan amount.

We know a lot of people get confused regarding eligibility for loans against property. We got you covered. Listed below are the factors that have an effect on the eligibility of your loan against property. Let us see the factors that banks and lenders consider for accepting and rejecting a loan against property applications.

Here are Various Factors Affecting Your Eligibility for a Loan Against Property

• Employment status of the individual (Income Proof)

Generally, there are two categories in this case. A self-employed person and a salaried person. Both are eligible for a loan against property. And both types of individuals need to submit documents as per requirements.

A self-employed person will have to give valid business proof. Business-related GST returns, Income Tax Returns (ITR), bank statements, proof of income from the business and a valid business registration certification. A salaried person will need to show employment proof. Company salary slips, bank statements, employment id cards and income tax returns.

Income status also shows the repayment credibility of the individual. This helps the bank determine the loan acceptability of the loan applicant. Failing to provide these documents can lead to the rejection of the loan application.

• Individual Credit Score (Credit History)

A credit score shows the creditworthiness of a person. Meaning how well or bad a person is at paying his loans and credit payments. A person who has a good credit score repays his loan on time. He/she has a higher chance of availing of a loan.

While a person with a bad credit score has very less chance of availing of a loan against property. There are agencies approved by RBI to analyse individuals’ credit scores. Based on the agency score, banks determine the eligibility of the loan.

A good credit score is somewhere between 700 to 800 points. Whereas a credit score below 700 can become problematic to avail of a loan in most cases.

• Age and value of the property

While availing a loan against property, banks see how old is the property for mortgage. Old, shabby property yields low-value amounts. In most cases loan amount offered is very low. If not, then the application is directly rejected.  

Make sure your property has good value and can yield a high loan amount as required. What kind of property is mortgaged against a loan is an important factor of consideration for banks and lenders.

• Insurance of the property

Generally, it is a good idea to have a property insured for many unforeseen reasons. Having insurance protects you from the burden of your liability to your near and dear ones.

Moreover, insured property increases the chance of you getting the loan. A loan against insured property has a higher chance of loan application acceptance. Banks can also offer low-interest rates.

• Income Tax Returns (ITR)

No matter how much you earn or have a stable income source. If you do not file an ITR, there are high chances of your loan application being rejected. Banks actively ask for 3 years ITR to avail a loan against property or of any case.

ITR is yet another essential factor in determining the acceptability and rejectability of a loan application. Make sure you file your returns regularly. This could land you a loan with a good interest rate.

• Any rejection of your previous loan application for whatsoever reason

It is a common practice for banks to check the status of your previous loans. Banks can see a record of all the loans you have been granted or rejected. Any rejection of a previous loan can lead to the rejection of your current loan application.

The creditworthiness of a person is an essential point considered by banks to release a loan amount. Make sure you don’t have any rejections of previous loan applications, as this may hamper your chances of getting a loan.

Conclusion

It is evident from the above points that availing a loan against property requires a lot of documents. Banks check a host of lists before releasing the loan amount. So, casually applying for a loan against property can lead to the rejection of your application. Make sure to fulfil all the terms and conditions applicable for availing the loan amount.

Hence, it is recommended to go through the documents and requirements set up by RBI and banks for smoothly availing of a loan. No doubt loan against property is one of the finest and easiest ways of meeting your financial needs. But you should make sure, the loan eligibility criteria are fulfilled and satisfied.

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