Under secured financing options, loans against property are one of the most popular ones. For starters, they attract one of the lowest rates in the market, courtesy their collateral-based lending-borrowing arrangement. As they are low-risk advances, lenders often don’t hesitate much in offering low interest rate levy to eligible applicants when providing property loans. Further, their long repayment tenure makes them affordable and easily manageable too, allowing a borrower to choose his/her suitable EMIs for repayments. Loan against property eligibility requirements are simple and minimal too.
Consequently, the borrower needs to provide only a handful of documents too for paperwork completion, which can be done totally online if one has applied digitally. Let’s check out in detail the criteria applicable to these loans along with other pertinent details one must know when applying.
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Eligibility Criteria for Loan Against Property
Even though loan against property eligibility criteria vary slightly from one lender to another, there are some standard requirements that most financial institutions lay down for prospective borrowers to fulfil. Given that a loan against property is a secured advance primarily depending on the applicant’s mortgageable property ownership for approval, the eligibility requirements are minimal. However, they are crucial for the lender needing to assess your financial capacity and stability. It is thus still crucial that you meet all the loan against property eligibility requirements laid down by your selected lender when applying for the loan.
Some common requirements you may be asked to fulfil include the following.
- Stability of occupation, with applicant being either salaried or self-employed
- Age between the minimum and maximum range as specified by the lender; can vary based on whether the applicant is salaried or self-employed
- Minimum monthly as per the city of residence
- Minimum property value as per the city of residence
- Indian national with stability of residence for a minimum of one year
Apart from these, the property being mortgaged should not have a shelf life remaining less than 20 years. The property should either be a residential or a commercial one to be eligible for mortgage creation.
Now, while these are the common mandates an applicant must fulfil, credit score is another critical aspect to look over when applying for a loan against property.
The Importance of Credit Score for Property Loan
Even though not a mandatory loan against property eligibility requirement. Credit score of a prospective borrower still holds critical importance when seeking funding. Also known as CIBIL score, it is a number varying between 300 and 900 assigned to individuals based on their past credit behaviours. Lenders rely on this score significantly when assessing borrower’s financial stability. And the risk associated with lending to him/her based on previous repayment history. Financial discipline followed, credit mix availed, and other critical parameters to be checked. The ideal score that represents a good credit history associated with the individual varies between 700 and 750. Anything above that is considered good and reliable, indicating the individual’s stability of repayment habits and low-risk borrowing profile.
Even though in the case of loan against property such risk is minimised due to the presence of asset. As mortgage, lenders still check the score to see if the borrower had been diligent in handling loan repayments in the past. Ideally, it is best to maintain a score above 700 when applying for the loan. You can go for a credit score check ahead of applying and take necessary measures that can help improve it. It is best to do so at least 6 months prior to applying as it can take as much time for any change to reflect on the score.
Paperwork Requirement for Loan Against Property
Along with meeting the necessary loan against property eligibility criteria. You must also provide the necessary documents to complete paperwork accurately. SOme necessary documents that are commonly required for application verification, processing, and loan approval include the following.
- Proof of identity and address through documents like Aadhaar card, Voter ID card, PAN card, driving license, etc.
- Proof of income, which varies depending on your income source
- Now, Proof of employment over 6 months to 1 year for salaried applicants
- And Proof of business existence for 3 or more years for self-employed applicants
- And Proof of property ownership
- Property tax receipts and such other property related documents
Once you have arranged all the documents and assured. That you meet the eligibility requirements, you are good to go for the application process. Make sure to offer a property for mortgage that is free of any encumbrance. Also, properties that are located in accessible areas with necessary amenities attract the best loan against property interest rates. When availing a property loan, you must take care to avail a loan amount only. As much as is your financing need and not over-borrow as the latter can create unnecessary financial burden.