Loans against property are a popular financing option for individuals who require a substantial amount of money for various purposes such as business expansion, home renovation, or education expenses. However, obtaining a loan against property is not an easy feat, as eligibility for such loans depends on various factors.
In this blog post, we will discuss the factors that affect loan against property eligibility.
Property Valuation
The value of the property being pledged as collateral is the primary factor that determines loan eligibility. Generally, the loan amount is calculated as a percentage of the property's market value. If the property's value is higher, the loan amount eligibility will also be higher. Therefore, it is essential to get a property valuation done by a certified valuator to get a fair idea of the loan amount that can be availed.
Property Type
The type of property being pledged as collateral plays a significant role in determining loan eligibility. Commercial properties are generally considered to be riskier than residential properties, and therefore, loan eligibility for commercial properties is lower compared to residential properties. The location of the property also plays a crucial role in determining eligibility.
Age and Income
The age and income of the loan applicant are also critical factors that determine loan eligibility. Younger individuals with a steady source of income have a higher chance of getting a loan approved. Most lenders prefer applicants with a stable job or business, as it indicates a steady income stream. The income of the applicant also plays a crucial role in determining the loan amount eligibility.
Credit Score
A good credit score is crucial for loan eligibility. A high credit score indicates that the applicant is a responsible borrower and is likely to repay the loan on time. Most lenders prefer applicants with a credit score of 750 or above. A lower credit score may lead to a rejection of the loan application or a higher interest rate.
Existing Liabilities
Existing liabilities such as credit card debt, personal loans, and other outstanding loans can affect loan eligibility. Lenders prefer applicants with a lower debt-to-income ratio, as it indicates a better ability to repay the loan. Therefore, it is essential to clear off existing liabilities before applying for a loan against property.
In conclusion, loan against property eligibility depends on various factors, such as property valuation, property type, age and income of the applicant, credit score, and existing liabilities. To improve eligibility, applicants must maintain a good credit score, have a steady income, clear off existing liabilities, and pledge a property with a high market value as collateral. By fulfilling these criteria, individuals can increase their chances of getting a loan against property approved.