Loan against property also called LAP is a preferred and one of the cheapest loans available in current time. As a matter of fact, the rate of interest applicable against LAP is one of the lowest next to the rates offered on home loans. This is owing to the fact the LAP is a secured option against property or mortgage. Thus, this facility is just available to individuals who are property owners. Here are few of the major loan against property features that makes it a popular option:
∙ High value credit option: up to seventy percent of the property value is offered as loan proceeds.
∙ Attractive rate of interest beginning from 8 percent p.a.
∙ Higher repayment tenure of as high as 15 years.
∙ Choice of foreclosure or prepayment too are available.
∙ Loan against property can be taken up as overdraft or term loan.
∙ Low processing fees beginning from 1 percent of the loan proceed.
∙ Top up option available.
Note that the above loan against property features is offered by most lenders including SBI Loan Against Property and HDFC loan against property. The interest rate offered by HDFC loan against property can range anywhere between 8 percent and 8.95 percent p.a. while SBI loan against property may begin from 8 percent p.a.
Loan against property application: Crucial mistakes to avoid
Even since the demand for transparency has enhanced in the financial sectors, all financial institutions have begun to follow a specified eligibility parameter while determining your loan application. As an outcome, it has become crucial for you to forgo the most common errors when availing loan against property.
Listed here are top seven common reasons for rejection of loan against property application
Age and type of property: One of the crucial reasons for loan against property rejection is the problem with property. Most institutions may not accept loan against property applications in the case of vacant plots. This is because the risks involved in such cases are considerably higher. Next key problem that results in loan against property application rejection is property’s age. Any property where the construction is older for over 2 decades is viewed as highly risky by the lenders. This is because many such properties may suffer different structural damages in the future. So, before you apply for a loan against property, ensure to renovate the property structure to satisfy lenders about property safety.
Incomplete property documents: It is a major problem with loan against property application where the applicant has incomplete property documents. Lenders require all the essential documents linked with property ownership involving the full-fledged chain of ownership, mutation certificate, property tax receipts etc. It permits them to verify the property ownership and understand if there are any kind of legal problems involved. If in case you are not able to provide the required documents, the loan application may be turned down. So, ensure you have all property documents handy to avoid application rejection.
Insufficient income: Lenders have strict requirements germane to annual and monthly income of applicants. It is done to ensure timely EMI repayment as loan against property are generally high value amounts. In the case of income that does not mitigate your criteria as per the lending institution, the loan application may be rejected. For instance, if you place an application for HDFC Loan Against Property, the institution will require you to have basic documents like ration card, telephone bill, electricity bill, voter ID, employer’s card etc. Besides these other necessary documents that are checked is your income like your latest salary slips, employer’s card, form 16 etc. Based on your income document, the institution takes its decision to accept or turn down the application.
Eligibility criteria: Next common reason for loan against property rejection is noncompliance with eligibility parameters specified by lenders. Lenders usually are extremely particular about such requirements and need the applicant to comply with it thoroughly. For example, if you are placing an application with SBI loan against property, then you must be at least 22 years old earning an income of at least Rs 5-6 lakh.
Inadequate job stability: Lenders want you to have a stable income source as this considerably lowers your default risk. If you have been frequently changing your jobs without any reason, then your LAP application may be rejected. Lenders generally require you to have a minimum experience of 3 years with at least 1 year with the current employer in the case of salary. In the situation of self-employed individuals, the business must run profitably for the past 3 years.
Low credit score: Like all credit options, lenders require you to have a strong credit score to be eligible for loan against property. Ideally, you should have a credit score of 750 and above to be eligible for loan against property option. So, you must continuously keep a close tab on your credit score and make sure that it remains above the required threshold. It can be attained by continuously checking your credit report periodically, identifying issues and getting it continuously updated.
Technical or legal problems: Next reason for loan against property rejection is technical or legal issues with the property. For example, few areas are blacklisted by the lenders. If any property is situated in that blacklisted area, application may be turned down. Note that property listed on the civic authority’s demolition list, is also considered a red flag zone. Additionally, few may also fail to pass the verification procedure that eventually results in application rejection. You must look at such problems and ensure to address them before you move forward with your application process.
Now that you are well-aware about the top major reasons linked with loan against property rejection, you can address such issues before loan application and thereby ameliorate your approval chances. Doing so would allow you to avail the loan against property from the selected bank or NBFC lender instantly in a hassle-free manner.