Do you know about your Loan Against Property eligibility? The use of this loan is generally to meet sudden unforeseen expenses in the form of medical procedures, education, wedding, travel, etc., or for debt consolidation. The Loan Against Property interest rate and loan sum are determined primarily by the present value of the mortgageable property and other factors related to the borrower. Let us see what these factors are:
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- The income trend, present figures, and future projections affect one’s LAP eligibility. An applicant with a higher income level and/or greater income stability, has higher Loan Against Property eligibility criteria. Similarly, the nature of their job is of importance. A person employed in an MNC or in a government job is thought to be more eligible than another. A self-employed person with a history of running a successful profitable business is also eligible.
- The age of the applicant matters to the extent that a younger applicant is more likely to be offered a lowest Loan Against Property interest rate, longer tenor, and a higher sanctioned amount than an older borrower (other eligibility factors remaining equal between the two).
- CIBIL score which directly denotes their credit rating has great value to a lender. This tells about the borrower’s discipline in debt repayment, aberrations (if any), timely payment of credit card outstanding dues (in its entirety), discipline in repayment of past and present EMIs, and so on. A score of 700 or above is the least expected for a better LAP eligibility.
- The investment patterns of a borrower indicate to a lender about the borrower’s risk propensity. Lenders consider those borrowers better eligible who invest in less risky and more stable products like government bonds, FDs, PPF, instead of skewing funds towards in equity.
- As already mentioned, the most significant factor affecting the Loan Against property calculator is the real and current market value of the potential mortgage. It has a direct relationship with the borrower’s eligibility and loan amount approved. The marketability of the mortgage is impacted by its location, area, and age. Lenders tend to sanction a loan sum equal to not more than 60% of the present market value of the property being used as mortgage.
- Other factors which affect the Loan Against Property calculator are number of dependents on the borrower, their family size, any other revenue generating family member, and their educational qualification.
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Let us now see how we can apply for Loan Against Property. While the process remains similar to that of a home loan, there are certain differences with regards to the processing of the Loan Against property application.
To start with, the Loan Against Property documents required are listed as follows:
- Personal identity and address proofs in the form of PAN, Aadhar, passport, driver’s license, voter’s ID card, ration card, etc.
- All the documents of the property establishing a rightful and legal ownership in the form of a sale deed, ownership deed, municipal corporation tax certificates, registration, lease agreement, insurance
- The applicant’s income proofs in the form of salary slips, IT returns, bank statements for a period of no less than the preceding six months to up to three years (as is the norm)
The lender, then, reviews the application and evaluates the applicant’s eligibility. A point to be noted is that one must carefully consider the LTV ratio or the Loan to Value ratio which a lender uses to justify their approval of a specific loan amount to the applicant. This number changes from one lender to the next and mainly is a factor of the lender’s individual internal valuation of the mortgageable property. This allows for some scope to negotiate with the lender on the LTV considered provided the applicant has an optimum CIBIL score, stable income patterns, a commercially viable valuation of the property being used as mortgage, and practises good financial discipline.
If you have understood the eligibility factors for an LAP, let us quickly review its benefits:
- Being a secured loan, it makes space for a much lower interest rate to the borrower(s), as compared to a personal loan or any other general use loan.
- The owner can continue to occupy their mortgaged property
- Debt consolidation to close high interest unsecured loans can be done by the means of an LAP to have one’s EMI burden eased out.
- A long tenor of an LAP compared to a personal loan helps ease the EMI stress on the borrower(s).
- The borrower is not restricted to use the loan sum in any legal way they deem appropriate
- The Loan Against Property tax benefits are an added advantage. If the LAP is used to buy another residential property or repair and/or upgrade one’s house, then tax benefits on the interest, up to a limit of Rs.2 lakh, can be availed.
Quickly check your Loan Against Property eligibility and go apply for it!