Loan Against Property Eligibility Criteria And Document Requirements

Shweta is facing a serious financial emergency for which she requires a considerable amount of funds. All she has is her house, and she cannot sell it. Under such a circumstance, she can look for a loan against property. A loan against property implies mortgaging your apartment or home to acquire a substantial amount. One can continue to live in such a house even after availing a loan against property.

Before learning more about loan against property eligibility criteria, let’s look at some of its features.

Salient Features of a Loan against Property

The following are some of the key aspects to remember when looking for a loan against property: 

• A loan against property is a secured line of credit. Your immovable property or house is the collateral against the sum that your lender offers as an advance.
• In case of non-payment of dues, a lending institution can sell the pledged property to recover its losses.
• Due to its secured nature, the loan against property eligibility criteria is easy to meet. Interest rates are nominal as well.
• Lenders calculate the maximum loan principal by calculating your home’s current market value. Even so, only a portion of this value is available as a loan. 
• You need to provide property documents required for a mortgage loan to avail this type of credit.
• The loan against property is free from end-use restrictions. Therefore, you can use the principal amount to fund any need without interference from your lender.

Documents Required for Loan against Property: Salaried Individuals

You will need to furnish the following mortgage loan documents if you are a salaried employee: 

• Address proof
• IT returns
• All documents related to the mortgaged property
• PAN Card
• Identity proof
• Bank account statements for the previous three months
• Salary slips
• Property documents

Also Read: Mortgage Refinancing: How Does It Work?

Documents Required for Loan against Property: Self-employed Individuals

If you own a business, submit the following loan against property documents: 

• Address proof
• Identity proof
• All relevant documents of the mortgaged property
• Form 60 or PAN card 
• Bank account statements for the previous 6 months
• Property documents
• Financial statements
• IT returns

Keep in mind that these are the basic documents necessary to avail of LAP. Based on loans against property eligibility criteria, some financial institutions may ask for additional paperwork.

What are the Eligibility Factors for a Loan against Property?

Loan against property eligibility criteria tends to differ from one lender to another. However, the following are some of the basic requirements you must fulfil:

• Applicants must be residing citizens of India.
• An individual must receive a regular salary from his/her employer. In the case of self-employed individuals, the applicant should have a sizable income from his/her business.

Lenders also specify an age group, and only those falling under this group can avail of such loans. Moreover, you should maintain a credit score of over 750 to maximise your chances of securing a loan against property. Keep in mind that along with meeting these requirements, you have to furnish the documents required for a property loan.

Also Read: Home Loan Tax Benefit Calculators

Factors Affecting Loan against Property Eligibility

Here are some crucial factors that play a vital role in determining your eligibility for a loan against property:

Borrower’s age

Lenders prefer younger borrowers when it comes to such loans. An individual approaching the retirement age may find it difficult to secure such a form of credit.

CIBIL score

Scores lower than 700 can lead to loan rejections as it indicates a poor history of loan repayment. Higher scores not only lead to easier loan sanctions but also lead to additional benefits like lower interest rates.

Tenure

The tenure you choose while availing of such a loan is assessed by the loan provider. It determines whether the lender is confident in your ability to repay the loan.

Property documentation

Perhaps the most important part of the mortgage loan documents list is the property papers. Any irregularities in these documents can lead to the rejection of LAP applications.

Steps to Increase Loan against Property Eligibility

Now that you know about loans against property eligibility criteria, here’s how to ensure that you qualify for such a credit: 

Build your credit profile

Repay your existing dues on time to ensure a proper credit score. A score above 750 will assist you in availing of all types of loans.

Keep FOIR under 40%

Fixed Obligation to Income Ratio or FOIR is the proportion of monthly debt to monthly income. If this exceeds 40%, it signifies that more than 40% of your income goes toward clearing dues. Applying for a LAP at such a time could lead to rejection.

Choose longer tenure

You can choose to opt for a long tenure to keep your loan EMIs down. When EMIs are nominal, a lender becomes more confident that you will be able to clear your debt without delinquency.

Additionally, look for a lender with relaxed eligibility criteria. Navi offers a loan against the property of up to Rs. 5 crores with easy-to-meet eligibility criteria. The lender also offers up to 25 years to repay the loan amount. 

Repaying a Loan against Property

A loan against property is a long-term credit, much like a home loan. You can opt for a tenure of up to 25 years for repaying this debt. Besides bearing the monthly EMIs, you can choose to prepay a lump-sum amount when you have excess funds available. This reduces the interest burden on the loan. 

Final Word

Assessing a loan against property eligibility criteria and necessary documents is crucial before availing of such a credit. Doing so can simplify the process of application while also maximising your chances of acquiring the advance.

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