How Is Loan Against Property Eligibility Calculated?

Banks and financial institutions offer secured forms of credit like a loan against property (LAP) to assist borrowers who may have an urgent need for funds. Through this form of credit, one can fulfil any personal or professional requirement by mortgaging a freehold residential or commercial property. Since the loan is linked to real estate collateral, one can expect large loan amounts. With lower interest rates and longer tenors, it is a favoured choice among borrowers. It is easy to avail and the repayment options can be tailored to fit one’s pocket.

Loan Against Property Eligibility Criteria

Lenders assess loan eligibility based on several parameters which could differ with each lending institution. Generally, the basic criteria broadly remain the same. These are:

  • Individuals should be resident Indian nationals between 25 to 70 years old. 
  • They must be gainfully employed in a public or private concern, or they should own a business venture for a particular number of years.
  • Prospective LAP borrowers must possess the minimum salary requirement signifying a sound repayment capacity. 
  • Applicants should possess a flawless credit history and excellent credit scores of 750 or above to receive LAP approvals.

Loan Against Property Eligibility Calculator

Borrowers can use a loan against property eligibility calculator to gauge the loan amount they may be eligible for. This will help you plan for the loan beforehand to facilitate faster LAP sanctions and steer clear of any hiccoughs during the tenor. 

This free online tool estimates loan eligibility by taking into consideration several crucial factors such as your age, liabilities, assets, repayment capacity, etc. Users need to input details of their property value, monthly earnings, other existing EMIs and so on. The calculator will then display the total payable interest, EMIs and the maximum amount of loan that you could be sanctioned. 

How to Access a Loan Against Property Eligibility Calculator

A loan against property eligibility calculator is user-friendly and certain fields could vary based on the type of calculator offered by your lender. Normally, this useful tool involves the following steps:

  • Visit the official website of your lender and navigate to the eligibility calculator under ‘Loan Against Property’
  • Enter details as asked like occupation, monthly income, address, preferred loan amount, date of birth, etc.
  • Provide information about your property and other ongoing liabilities
  • Submit the page to view loan eligibility results. 

Merits of a Loan Against Property Eligibility Calculator

An eligibility calculator aids in repayment planning and effective management of your finances. It has a distinct edge over manual calculations due to the following reasons:

  • Accurate and reliable – Manual calculations are prone to errors. Using a calculator eliminates this risk.
  • Fast results – Computing by hand can be lengthy and time-consuming. The online calculator provides results in seconds once you input the required values.
  • Convenience – You can carry out complex number-crunching tasks effortlessly from the comfort of your home.  

Factors That Affect Loan Against Property Eligibility

The factors given below directly influence your eligibility for a loan against property:

Age of Applicant

The loan applicant’s age decides his/her repayment ability. Younger borrowers have a longer time span to repay the loan with improved career growth and financial well-being. Hence, they are more likely to get quicker loan approvals over older applicants who may be closer to the end of their service years leaving them with depleting income sources. Such individuals may, therefore, find it tough to obtain a loan. 

Work Profile

Holding stable jobs with reputed companies assures lenders that you can pay the EMIs on time. In case of self-employed applicants, lenders look for profitable business enterprises with consistent earnings before they grant LAP approvals. 

Credit Score

An excellent CIBIL or credit score indicates good credit behaviour ensuring timely loan repayments. If you possess a high credit score, you can expect loan sanctions of bigger loan amounts at lower loan against property interest rates and suitable terms. Conversely, individuals with poor credit scores may not receive loan sanctions of the desired principal sum. Moreover, they could be given heavier rates of interest and rigorous terms raising the cost of credit. 

Income Tax Filing

Filing income tax returns regularly implies stability in employment increasing your chances of gaining loan approvals.

Sources of Income

Generally, people employed in the public or private sector or multinational companies find it easier to secure a loan due to job security and fixed sources of income. However, if your salary is low and the proposed EMI payments exceed 60% of your earnings, you could face loan rejection. 

Tips to Improve Loan Against Property Eligibility

If your LAP request is turned down due to poor eligibility, avoid applying with multiple lenders. These factors affect your credit score creating problems in availing any future credit. Instead, take corrective measures to enhance your eligibility and then re-apply for a loan in a few months’ time.

The following tips can help you improve your LAP eligibility:

  • Apply for a LAP along with a co-applicant who has a strong credit score and income profile.
  • Clear existing debts to increase your repayment capacity so that you have adequate cash to manage a property loan.
  • Include additional sources of income like rental earnings, etc. to show a higher income.
  • Build and maintain a good credit score. Pay your credit card bills and EMIs on time. 
  • Approach your existing lender for a loan. With a familiar profile and repayment record, they might extend better LAP interest rates and terms.

Summing Up

Since the loan amount for a loan against property is very high, the repayment tenor is flexible to ensure ease of repayment. Nonetheless, before you apply for a loan against property, use an online calculator to appraise the finances involved. Also, if you are a salaried borrower, you can enjoy loan against property tax benefits up to Rs. 2 lakh on the loan interest component under Section 24 (b), provided the loan is utilised to fund a new residential house. You can claim this deduction when you file your annual tax returns.