It is widespread to face a situation in which you urgently need funds. The reason could be paying for a medical procedure, covering business expenses, paying for your kid’s higher studies, etc. If you are uncomfortable using your savings for these expenses, one solution is to apply for a loan against property.
The reason why this loan is beneficial is that lenders are likely to give a high loan amount. Since this loan is secured, lenders can offer competitive interest rates. Generally, financial institutions offer up to 80% of the cost of the property pledged as collateral. This helps borrowers get the required funds for their expenses.
Before speaking to a lender about getting this loan, it is essential to know its eligibility criteria. Financial institutions consider numerous factors based on which they set an applicant’s eligibility for a loan against property. Being unaware of these factors can result in your application being rejected.
So, take a look at five factors that lenders consider that influence your eligibility for a loan against property:
1. Applicant’s credit score
Before approving a loan application, any financial institution will check an applicant’s credit score. So, to get approval for a loan against property, it is advisable to maintain a credit score of 750 or more. Lenders prefer borrowers with good CIBIL records and offer good deals to entice them, such as a low loan against property interest rate or a high loan amount.
2. Repayment tenure of the loan
Experts suggest that borrowers choose long repayment tenures to improve their eligibility for a loan against property. This is because a long repayment tenure means the monthly installments would be smaller, minimizing the lender’s risk as borrowers are more likely to manage smaller EMI payments.
3. Applicant’s age
Lenders prefer borrowers to be actively earning throughout the repayment tenure of the loan. If you are reaching retirement by the end of the loan tenure, lenders could find your loan application a risk.
4. Property documents
Make sure to keep all the property documents in place. These include permits from local organizations, environmental clearances, building plans, etc. You can improve your loan against property eligibility if everything is in place.
5. Monthly income
Those who are earning regular monthly payments will afford a loan. This is why lenders prefer applicants who have a good employment record. This critical factor can help boost your eligibility for a loan against property.
So, these are five factors you need to be aware of that are essential to your eligibility for a loan against property. In addition, before you go ahead and apply for a loan against a property, it is necessary to check with the lender regarding the loan documents. This is to ensure that there are no complications with the documentation process.