Borrowing and lending are inseparable parts of our financial statements. During certain situations, when we are falling short of cash, we considering borrowing from various sources. One of these reliable sources is a loan against property. Not only this type of loan is better than a personal loan, but also it offers a lower interest rate.
Think about it, a personal loan is acquired solely on the goodwill with the financial institution and credit score. For this reason, personal loans have a higher interest rate. However, loan against property is not the same. It provides the loan amount by keeping your property as collateral, which reduces the interest of this loan.
Here Are The Factors Which Impact Loan Against Property
There are multiple factors that impact your loan against property eligibility. Even if one of these factors go wrong, you can be denied loan against property. Hence, check these 7 factors below to improve your chances of acquiring a loan against property.
1. Credit Score
Your credit score is important. This goes for every type of borrowing. In fact, your mobile provider checks credit score before offering a postpaid connection. Hence, there’s no doubt about the fact that your credit score matters in loan against property eligibility as well.
Your credit score is decided based on your credit history (Read: Timely re-payment of credit).
If your credit score is good or average, then you can get the loan. If it is poor, then you won’t get the loan. Further, if you don’t have a past relationship with the financial institution, the lender may even hesitate with an average credit score.
2. Income Source
The income source matters because the provider needs to ensure regular EMIs. So, your income source plays a major role, and this importance can’t be minimized even when you take a loan on a high-value property or asset. You absolutely need a regular income source to re-pay the instalments of the loan.
With this, it should be kept in mind that the financial institution can also reject your application if the EMI amount forms approximately half or more of your income.
3. Property Details
When taking a loan against property, your property papers will be thoroughly analyzed. This goes without saying.
During this analysis, if it is found that your property is involved in some dispute or you don’t have required papers, then there are high chances of rejection.
To avoid that, the best method is to arrange your papers in the right order and check details beforehand to provide exact documents.
The loan tenure of your loan against property is significant. If you choose a large tenure, this means your loan EMI will be less. If you choose a small tenure, your loan EMI will be more.
Considering that, if you have less income and your tenure is also small, the provider can deny your loan against property. You need to balance the tenure properly according to your income so that the EMI forms not more than 40% of your income.
5. Job Stability
Job history decides how stable you are in your career. Hence, if you are hopping jobs, then your loan against property eligibility is low. You need to stay with one employer for some duration without consistently hopping from one job to another. This will help you avoid loan application rejection.
For most of the loan providers, job stability clearly means that you are working with one employer for approximately 2 years.
6. Previous Loan Rejections
Whenever you apply for a loan, it reflects in your credit score. With multiple inquiries and rejections, not only your credit score decreases but also your chances of a loan also decrease; even if you still have a good score.
Previous loan rejections and credit hungry nature make you unsuitable for a loan against property.
7. Inadequate ITR History
If you have everything right and your credit score is also good, but your ITR history is unsteady, it depicts you as a risk case. It is necessary to have a consistent and steady ITR history.
Given the above factors, it is necessary to become more aware of your financial habits and decisions. One small mistake can affect your loan against property eligibility. To avoid that, read the above tips and start improving your creditworthiness.