Lending and borrowing have become the inseparable parts of our lives. Such occasions are very common when you and your life milestones are apart just because of the lack of sufficient fund. Whenever you are at a stage of taking any major step in your life, it is the finances which become the most important need of the time. One can call it an ideal situation when you are able to save enough to use during the needs. But unfortunately, the life which we lead is different from the ideal one. Here most of the times we fall in a shortage of money and to fulfill the shortage, we are to borrow. Having a debt is no more a big deal. A life with debt has become the new normal for the present generation.
There are several ways to borrow money during needs. Among all those sources of borrowing, a Loan Against Property (LAP) is probably the best option as the interest rate on a LAP is much lower than that of unsecured loans like a personal loan. To avail a loan against property, it is obvious that you should own a property. But owning a property is not the only criteria to fulfill. There are some other eligibility criteria too which are to be fulfilled.
Let’s Learn About the Factors Which May Affect Your Eligibility for Loan Against Property
- Your Credit Score
The credit score is the most important criteria to check for the eligibility of an unsecured loan. But while granting a secured loan like LAP too lenders do check credit score. A credit score is a numeric expression to find the past loan repayment history of loan seeker. The creditworthiness of a borrower depends a lot on the previous records of loan repayment.
- The Source of Income
The source of income of the loan seeker is checked to ensure the regular payment of EMIs. Even if you own property which is worth a high value, you may not get a loan against that property if the lender is not satisfied with your monthly income.
- The Property Documents
When it comes to taking a loan by mortgaging your property, your property title should be free from any legal issues. The property papers are the first thing to be checked by the lender. If your property is under any kind of legal issues, it is certain to get a rejection of your loan application. The lender will demand the full set of documents such as title deeds, approvals from relevant authorities, building plans and other documents as required.
Loan against Property or a Home Loan: Understand Your Requirements
- The Loan Tenure
The loan tenure which you desire to have may make your loan against property get rejected. If you want to have a short loan tenure, your EMI amount will be higher and vice versa. In longer tenure, your EMIs will be spread across longer durations which results in smaller EMI amount. To check your EMI use home loan EMI calculator. It helps you to plan your finance. In the case your income is low and you want a smaller duration of the loan, your loan application is likely to be rejected.
The age is another bar which you are to cross to prove yourself eligible for the loan. One must complete the repayment of the loan before he/she reaches 60 years of age. Let’s say your age while applying for the loan is 55 years. So in such scenario, you can’t opt for a tenure which is longer than 5 years.
- The Job History
If you are a professional, your job stability is also checked by the loan provider. In the corporate world, changing a job is taken as a ladder to step forward to get a better opportunity. But this step of yours can be taken as a negative remark for the lender. To become eligible for a loan against property, one must be employed with the present lender for a minimum of 2 years.
- The Property Insurance
Along with many other criteria, the lender do check the insurance of the home. To make your property eligible for a loan against property, it must have an insurance on it. An insurance on a property safeguard your financial interest as well as the lender is saved from facing an NPA. Without a home insurance, your property becomes ineligible for fetching a loan for you.
The Words of Cautions
A loan against property is a comparatively easier and cheaper way to avail a loan. A loan against property is a much pocket-friendly way to avail a loan. But all those facilities of a loan against property comes with risk on your property. Whenever you avail a loan against property, you must remember the fact that while taking the loan, you are to submit your property documents to the lender. If it happens that any unfortunate situation occurs which end up in making you unable to pay off your loan, the lender is authorized to sell your property to recover the lent amount. So whenever you avail a loan against property, you must have to be disciplined in your loan repayments. If you take a loan against property and pay it off on time, you can enjoy the best benefit of owning a property besides living in it.