Tuesday, 22 January 2019

7 things that impact your loan against property eligibility

There are few loans that have the specific purpose at an end user level. A home loan is taken for buying a house, a car loan or an auto loan for buying a vehicle, education loan for studies, business loan for business purpose. But loans like personal loan or loan against property, do not have a specific purpose for the end user. They may use the amount received from a loan into any of the use they wish to. When we talk about loan against property, it is a type of loan which is a secured loan and could be taken by keeping a property as security to the lender.

The only difference between personal loans and Loan against property is that personal loan is a type of unsecured loan and LAP (Loan Against Property) is a type of secured loan. So what is the basic difference between secured and unsecured loan? As the name states, a secured loan is the one where the borrower will keep some security against the amount borrowed and in an unsecured loan, there are no such things kept against the amount that is taken. Also, it is easier to get a secured loan as in case of default the lender can compensate the money by selling off the security which is kept. However, one can not just get that by mere keeping the security and let us now look at the factors that impact the eligibility.

1. Credit score
A credit score as we all know is a three-digit number ranging from 300-900 where 300 is considered the lowest and 900 is highest. Made from five parameters, it shows that how responsible one is when it comes to credits they have taken. May it be any loan, secured, unsecured, Credit score is always checked while approving the loan as it is one of the major factors for any lender to check the creditworthiness of the borrower. When in such a case if the score is low, one may try for a personal loan for low cibil score in order to get an instant loan.

2. Documents of the property
While applying for LAP, the documents of the property are studied carefully.
• The property should be on the borrower’s name. Only then can the loan be approved.
• If the property is on forefather’s name, there must be proper power of atony which gives all the rights to the borrower to take any decision on that.
• The property should have no legal issues. That is if there is any dispute over the property, then, in that case, the loan is not sanctioned.

3. Source of income
If suppose, the property that is kept as the security in LAP against the money borrowed has the monthly repayment cycle of say 25,000 and the borrower has the income of 30,000 or maybe even less then in that case the loan is not sanctioned. The reason is, the borrower should be easily able to make the repayment of the loan taken after deducting the usual expenses he/she may have from their salary or the amount they earn.

4. Loan tenure
Strange fact, but even loan tenure of the loan applied for also plays an important role in getting loan sanctioned. If the loan is applied for more then 10 years in usual cases, it becomes difficult to get it approved. However, the purpose of applying a loan is also checked in such cases.

5. Employment status
Many times, an individual is not steady at one particular job. Do they keep on switching because of whatever reason and that gives a sense of instability to the lender as would they be consistent enough in repaying the loan amount?
6. Insurance on property
The insurance taken over the property also plays an important role. If in case something happens to the property, then in such cases the valuation may go down. But if the insurance is taken, then it could be recovered.

7. Age
Age is always a factor while applying for any loan. May it be a personal loan or home loan or car loan of loan against property. The average lifespan of any individual person is checked against the number of years they may work and the continuing source of income. Then the loan tenure is checked and approved it all are in sync.
Except for the above mentioned seven eligibility criteria, rejection of previous loans, bad credit history, type of land are few other criteria that are checked while the borrower is applying for LAP. One has to understand that just because this is a secured loan does not mean it will be approved in minutes. Ans always, when the credit history is weak or the score is low, one must try and apply for a personal loan for low cibil score.

Saturday, 19 January 2019

Frequent changing of jobs can affect your loan approval

Jobs always give a financial security and that’s the most required these days. Unlike ancient time where things worked with the barter system, today it is the money that is exchanged in terms of goods and services. It takes a lot find a decent job where one can adjust themselves, work and get settled. Sometimes this journey is very comfortable and sometimes it is full of a roller coaster. Not everything ever is as perfect as one wants it to be and hence working in the same organization for forever is not very common and in some cases not even advisable.

Many people change their jobs after a certain period of time depending on their individual needs. However, changing jobs too frequently also has its repercussion and effects. One may have to change a job for better perspective, good salary hike, newness or to get better comfort than in current organization. But, changing them too frequently also gives an idea about instability. When talking about loans and credits, before the approval of the loan, the employment status is always checked. The earning obviously is checked in both the cases if a borrower is a salaried individual or a self-employed individual as that is the indication of how much loan amount is to be sanctioned in order for the borrower to pay that loan easily.

There are few loans that are approved only when an employee is working in the current organization for more than one and a half or two years. The frequent change gives the loan approvers an idea that that must be a pattern that one follows. What if the job where they are working currently would not be a longer duration one, and he/she may switch and will not be able to pay the EMIs on time? It becomes a risky decision for the lender. Also, the cibil score will get affected if the borrower is unable to pay the EMIs of the loans and credit card bills on time. This would lead the score to go down and the report gets affected.

There are a few examples where an individual has genuine reasons for the switch of their jobs. But, they can’t be as fast as changing it every six-eight months or each year for a very long period of time. Once in a few years and some in a couple of years would not be very bad as it may happen that an employee is not very comfortable in the process and hence planning to change. But yes, if that is in all the jobs, then it gave an impression about the person not being stable and responsible enough to adjust.

Cibil score calculation may not directly has these criteria that a changing job directly affects it. But when one applies for a loan, the background is checked by the underwriters. Underwriters are the people who check the eligibility of the borrower or the applicant who has applied for a loan. For a few loans where the loan amount is higher, a reference check is done. To the people staying in the neighborhood, the HR of the organization where the individual works and sometimes maybe in a previous organization if the applicant has recently switched a job. In any of the cases, the inquiry definitely goes to the employer and if one frequently changes the job then, in that case, it gives a negative impact. With the reference check, the underwriters also take a personal discussion with the applicant to understand a few aspects when they can see frequent job changes or bad cibil score.

With all this, the bottom line is that one must be bey sure of the decisions they take. Today may not be a day where they want to apply for a loan, but tomorrow there can be a possibility that they have to. If not taken care today, it may affect it tomorrow!