Loans can be applied when there are financial emergencies such as buying a new home, higher education, Medical expenses, Children marriage or any other major expenses. Every person needs financial help when his income is not enough to pay expenditures. To facilitate his needs banks have come up with various kinds of loans.
A home loan can be applied whenever you are buying a new home. A personal loan is a collateral-free loan which can be taken for various reasons. If you own property such as land, commercial buildings, or home, a loan can be applied against it is called a property loan. As of March 2018, India’s Household Debt reached $289.3 billion showcasing the ongoing demand for this kind of loans.
Benefits of property loan:
- Availability of higher loan amount
- Longer tenure
- Quick Approvals
- The loan amount can be used for any purpose
- Market value for both business and commercial properties
- Best Interest rates
While issuing property loan, banks examine the property in order to decide the loan amount. Depending on the state, location, market value, around 60%-70% of the property value is sanctioned as loan. There will be an agreement between the borrower and the lender to pay the sanctioned loan amount over a period of time. If the borrower fails to pay the full amount within the agreed time or missed paying installments, the property will be taken by the lender or bank authorities.
It is a misconception that every property owner is eligible for a property loan. Though it is easy to get a loan if the property is in your name, there are various other factors which affect the eligibility criteria.
1) Establishing a good credit history
Credit history is another factor affecting the credibility of your repayment. Low credit score can change things even after having high-value property. The credit score is based on your payment history, previous loan repayments, current debt and many other factors. Maintaining a good credit history showcases your financial strength and the assurance to pay monthly instalments.
2) Work Stability & Experience
Once you borrow the loan EMI has to be paid, if not the bank has the authority to seize whole property. To pay the monthly EMI having a steady income is very important. The lender verifies your past work history, Payslips, Total work experience, Current work experience with the employer before accepting your loan application. Usually, 2 years of current experience is required to be eligible for the loan.
3) Prompt Income Tax payment
Tax returns let the lender know the full history of your financial situation. Submitting tax returns is mandatory while applying for a property loan. This is to make sure that there are no financial hiccups in your previous years and the income is stable.
4) High Property Valuation
The first thing that matters in a property loan is the property. If the property value is high then banks will easily sanction loan because this loan is completely dependent on collateral. The bank has a low risk with the high-value property hence it is easy to get a loan. Since property loan interest rate is less, having high property value is absolutely an added advantage.
5) Paid or No Debts
Having multiple debts such as personal loan, a student loan may affect the eligibility. Previous debts and loan payment history are thoroughly analysed. Failed EMI instalments or dishonoured cheque etc can be a red mark in your application. Debts will affect your income which may reduce the loan amount. Before going for a property loan make sure to clear all your previous debts.