What are the Requirements for a Loan Against Property?

Loans against property are a type of secured loan. Under these types of loans, a borrower pledges a residential or commercial property as security or collateral. Some lenders also accept land as collateral. In return, the borrower gets a certain percentage of the market value of their property as loan. In general, lenders sanction anywhere between 50% to 60% of a property’s value as a loan. The LTV ratio goes down in the case of commercial properties or land.

Loans against property offer several advantages. To start with, these are one of the few loans that give borrowers access to a substantial amount of money. If your property is worth Rs.2 Crore, you can easily avail up to Rs.1 Crore as a loan by pledging it as collateral. Further, loans against property draw a low rate of interest and come with a long repayment tenor of up to 20 years, which makes repaying these loans quite easy. However, since these loans involve a substantial amount of money, lenders are strict about borrowers meeting the eligibility criteria for loan against property. Inability to do so can lead to loan application rejection. 

Here are the eligibility criteria for loan against property. 

• To be eligible for a loan against property, you must be a resident citizen of India. 

• If you are a salaried applicant, you must be between 28 and 58 years of age and if you are a self-employed applicant, you must be between 25 and 70 years of age. Please note that the age requirements vary from lender to lender and therefore, one must check with their lender before applying for a loan against property. Also, the maximum age is always the age at the time of loan maturity and not applying for the loan. 

• If you are a salaried person, you must be able to show at least 3 years of work experience in a reputed private-sector company or a public organization. 

• If you are a self-employed person, you must be able to show at least 5 years of business vintage. 

• Borrowers applying for a loan against property must also be able to show a stable source of income. This is crucial to convince the lender that the borrower can repay the loan they wish to take.

•  The borrower must mandatorily have a CIBIL score of 750 or above. A CIBIL score below 750 indicates low creditworthiness and repayment capacity. Thus, if your CIBIL score is below 750, it is advised that you work on improving your CIBIL score first and then apply for a loan. 

• Lastly, your lender will also ask you to submit certain documents(Checklist for loan against property). Please go to your lender’s official website and go through the documents you will need to submit to become eligible for a loan. Please collect and keep ready all documents to ensure a hassle-free and smooth loan application process. 

Final Words

Loans against property are an excellent way to arrange a substantial amount of money quickly. However, these loans involve collateral and therefore, one must avail of these loans after careful consideration and proper planning and only when they can afford to pay loan EMIs without defaulting.