In a loan against property, borrowers pledge a valuable asset, either a residential or a commercial property he/she owns. The lending institution, in return, sanctions a loan amount at a specified rate of interest for a fixed tenor. Moreover, a loan against property does not involve any end-use restriction, making it a suitable financing option for various purposes.
A loan against property, also known as a mortgage loan, can be used to finance borrowers’ business requirements, pay for higher educational purposes, marriage, or multiple other uses. It also comes at a lower rate of interest than personal or business loans and gets sanctioned within a reasonable time.
However, there are certain things that one needs to be mindful of when applying for a LAP. Knowing the number of reasons for which an application can be rejected is paramount in this regard.
Reasons why a LAP application may get rejected
A loan rejection can negatively impact one’s financial record. Here are a few instances in which financiers might shoot down an application –
- The property is too old
- Poor credit history
- Irregular source of income
- Poor banking statements
- Rejection of previous loan applications
However, there are ways to avoid rejections. Read below to know the ways.
6 ways to avoid loan against property rejection
Maintain a good CIBIL score
CIBIL score plays a very crucial part in loan against property eligibility. It is advisable that applicants maintain a CIBIL score above 750 to qualify the CIBIL score bar easily. Anything below 600 is considered poor. Applicants must try and settle their previous or ongoing dues before applying for a LAP. Also, paying credit card bills on time helps to increase one’s CIBIL score. Partial, delayed, or skipped credit bill payments will adversely affect an applicant’s credit score.
Applicants must hold his/her present job at least for 2 years. Self-employed individuals must be successfully running a business for at least 3 years. With proper documentation such as income proof or salary slip, KYC documents, updated bank statements, etc., applicants can get swift approval for their LAP. Check the specific set of loan against property documents required by different financiers before applying.
Check property documents
It is imperative to have a proper set of property documents. The property’s registration certificate, clearance certificate, insurance papers, tax papers, sanctioned building plan, non-encumbrance certificate, etc., should be correct and valid. Since in a LAP, the property is mortgaged, it is important to have all the property papers in place.
Avoid multiple loan applications in a short time
Applicants should avoid applying for loans from multiple sources within a short span. Multiple applications lead to hard inquires by financiers that reflect on one’s credit score negatively. It presents an applicant as credit hungry, making financiers wary.
Estimate how much loan you can apply for
One can use the online loan against property EMI calculator to calculate the monthly EMIs payable. Applicants must also consider that their monthly financial obligations do not exceed 50% of the income.
Default on age bar
For a loan against property eligibility, applicants must not be lower than 25 or nearing their retirement age. However, the minimum and maximum age bars vary from lender to lender.
Loan against property without income proof
Individuals wanting a loan against property sans income proof can consider a joint loan application to increase their credibility. The co-applicant should have a regular source of income with valid salary slips and good credit history. Individuals can use a loan against property interest rate calculator to assess his/her EMIs and the total repayment capabilities.
Applicants of LAP will need to submit a few necessary documents for evaluation. Loan against property documents required includes the applicant’s identity proof, address proof, original property papers, last six months’ bank statements, and processing fees.
However, several NBFCs provide pre-approved offers on loan against property, negating the need for documents. These offers are valid on various financial products, including home loan, loans against property, etc. Individuals can check their pre-approved offer by providing their name and mobile number.
Therefore, applicants must check that they meet these criteria properly to increase their chances of availing of a loan against property.