What affects your possibilities of LAP (Loan against Property) Approval?
The Top Factors That Control Loan Against Property Approval
There comes a distressing time in one's life when nothing seems to work in one favor. The matter becomes worse when the issue is financial.
Dealing with a financial challenge is not difficult when you have a loan against property beside you. A loan against property or LAP loan is approved against a residential or commercial property or plot of land at attractive terms and a low rate of interest.
However, despite owning a property, borrowers frequently find their loan applications rejected due to some reason or the other.
The following are the factors that affect loan against property eligibility and approval.
The Top-5 Factors That Affect the Possibility of LAP Loan Approval
Lenders evaluate a borrower's repayment capability by looking at their net monthly income. The net income is gross income minus deductions. The higher your net income, the better your repayment capability.
While evaluating a borrower's repayment capability, the lender also considers their unpaid debt. For example, if your monthly income is INR 40,000 and the total of your existing EMIs is INR 10,000, your net monthly income is INR 30,000.
In such a case, the maximum EMI of your loan against property can be INR 10,000.
The borrower's age plays a dominant role in determining a loan against property eligibility and approval.
You can generally apply for a loan against the property until 60, and the maximum age on maturity needs to be below 65. Hence, the farther you are from the maximum age, the higher are the chances of loan against property approval.
Moreover, you can often get the lowest interest rate when your age is at least twenty years less than the maximum age limit.
When you take loan or card repayments seriously, your credit score increases. A high credit score enhances the possibility of a loan against property approval.
In contrast, if a borrower defaults on their EMI payments or avails too many loans, their credit profile takes a hit, making LAP loan approval difficult.
Hence, if you want to ensure a loan against property approval, consider keeping your loan profile humble and repay the dues before due dates.
The loan term determines the EMI amount. For instance, when you select an extended term of twenty years, your loan against property eligibility will be higher. However, a short-term loan enables you to clear your loan earlier. Opt for a short-term loan against a property when you want to free yourself from debt quickly.
The Nature of Income
Just as important, the income is, so is the stability of your job or business. If you are a frequent job-hopper or your business's profit is meager, the chances of loan rejection will be higher.
Hence, before applying for a loan against a property, you need to ensure that the lender is satisfied with your income source and its nature.
In addition to the factors mentioned above, your property also affects the loan against property eligibility, interest rate, and approval. Lenders analyze the resale value of the property while determining the loan amount.
This helps them to liquidate the property and get their investment back in case the borrower defaults.