A personal loan becomes crucial during financial emergencies, which come without notice. Getting a personal loan is more accessible for salaried people, as most banks and financial institutions offer personal loans. Getting a loan could be difficult if you are a non-salaried and self-employed person. Instead of a secured personal loan, you may need to apply for an unsecured loan. For example, you can apply for a loan against residential property.
So, how can you apply for a loan again property (LAP)? How much loan can you obtain against a property? You can find answers to these questions in the following section.
Steps to Increase LAP Amount
A systematic approach can help you improve the loan amount for a loan against the property. Knowing the factors that can fetch a better loan amount is essential. So, you must learn those factors first before applying for a LAP.
1. Credit History and Score
Many borrowers think a loan against the property is an unsecured loan, and thus they do not need to show a credit score. In reality, most lenders check the credit score and history of the applicants. Checking credit history is essential to judge a person’s credit behavior. On the other hand, it is equally crucial to find a credit score to make a loan offer. A person with a high credit score will get a high loan amount. Typically, you can get a loan up to 70–80% of the overall property’s value.
Therefore, you must build a good credit score if you want to get a high loan amount. A good credit history helps you get a loan quickly with minimal document checking. Therefore, applicants should make it a habit of paying credit card bills and EMIs on time to improve their credit scores, which will fetch exciting loan offers in the future.
2. Income Status
The lender will check the income status of the applicants for security reasons. Every lender wants to ensure that it lends money to someone who can easily repay the loan. In a loan against property, the lender has the security of collateral. If the borrower does not repay the loan, the lender can sell the property and get the money. However, it does not mean that the borrower’s income status does not matter.
The LAP lenders always prefer the borrowers in the high-income category over the other borrowers. If you use the loan against the property calculator, you will notice that a higher loan amount is in offering when your income status is stable.
3. Condition of the Property
The loan amount in the LAP depends on the property’s condition and current value. An old property may need a reasonable loan amount. On the other hand, a newly developed property can fetch a handsome loan amount. The lender uses a unique mechanism to inspect and judge property value.
Typically, the lenders have an inspection department for judging the property value. The borrowers can take a few measures to improve loan approval chance. For example, you can consider refurbishing the property before applying for a loan. Investing a small amount in proper furnishing and repairs will fetch you a high loan from the lender.
4. Type of Property
The loan amount also depends on the type of property you have. For example, some people have lands to apply for a loan against the property. Similarly, some people have residential houses to apply for a loan against the property. A residential structure will fetch a higher loan amount compared to vacant land.
Similarly, you can also apply for a loan against a commercial property. You will find that a commercial property brings better loan approval chance. The lenders find it convenient to recover unpaid loans by selling or renting commercial properties.
5. Reason to Apply for the loan
People have different reasons to apply for a loan, though they must know that the loan approval chance may depend on the reason. In some cases, lenders do not ask for the reason behind applying for the LAP. But, most banks want to know the reason, and they approve loans quickly when the reason is valid. So, these are certain things that you should keep in mind when applying for a loan against the property. Choosing the right lender is the most crucial thing when you apply for such a personal loan. You must approach a bank or reputed financial institution while seeking a personal loan.