Not Eligible for a Loan Against Property? Here are the Top Factors
A loan against property (LAP) makes it possible for you to leverage your asset to raise funds at a low-interest rate without affecting ownership of your property. The LAP can be used not only for major capital purchases or for financial emergencies but has a variety of uses, making it a popular loan option among property owners.
Let’s go through some of the factors you need to consider before applying for a loan against a property.
1. LAP Interest Rate
Interest on loan against property can be a deal-breaker when it comes to the long-term cost of a property.
Interest rates can range from a low of 8.15% up to 13.2%, depending on the lender and your credit score, combined with the type of property it is – commercial, self-occupied residential, or non-self-occupational. The interest rates may also vary depending on the loan amount and tenure you’ve opted to take out the loan.
2. A Bad Credit Score
A bad credit score can put a real damper if you want to apply for a loan against a property. Naturally, lenders want to make sure that their loans are repaid before giving out money, which is why they consider one’s credit history during the process of underwriting. If your score isn’t up to par, then you will have a harder time being approved for your loan.
3. Steady Income
In order to apply for a loan against property through PNB Housing, one of the most important factors is that you must have a regular source of income. This makes it easier to ensure that your monthly payments will be paid on time.
4. Loan Applicant’s Profile
Another important point to consider when looking at the rates you will be charged for your loan is your personal profile. Your background, income level, credit history, location of residence, and other factors will all affect how high or low your interest rate would range.
5. Borrower’s Age
If the borrower has achieved or will reach retirement age in the next few years, your loan application is likely to be rejected. In such cases, you can always look for loans with a shorter term, but this may affect your monthly installments! It’s important to take these factors into consideration when applying for an LPA.
6. Loan Tenure
With longer tenures, your overall debt burden diminishes. If you make an average income, then it’s likely that you will find yourself in a position where monthly payments are either too high or too low. Instead, if your budget doesn’t allow for high installments then opt for longer tenures so that all of your installments are stretched out over long periods of time resulting in lower EMIs.
7. Inadequate Property Documents
Before you start to think about applying for a home loan, it is absolutely essential to have all of your ducks in a row. Everything from the property is clear and legitimately yours to meeting certain criteria. This includes property documents and other pertinent paperwork. When it comes to LPA, the bank or other lending agency will want reassurance you can repay them back in full. So if your lender isn’t satisfied with the paperwork provided about the property they will not approve the loan.
8. Property Insurance
A well-maintained, insured property will help build trust between you and your lender. It increases your chances of getting approved since lenders like to see evidence that the property is protected. That will make them more confident in your ability to pay back the loan on top of regular payments because they know their investment would be protected if something happens to it.
So, with all these pointers in place, you will be able to easily determine the factors that would affect your eligibility for a loan against property.