Applying for a loan against property is perhaps one of the easy ways to get some good money, especially if you are under pressure and need a large sum almost immediately. So, once you complete the application form and formally log in your file, it is entirely the bank’s discretion to either approve or reject your loan. However, with some amount of preparation and research you can ensure that you have fulfilled all the necessary criteria in order to get your loan approved.
Let us take a look at some of the common reasons for your LAP application to be rejected:
I. My property is not that old
The Age of your building is one of the most important factors for your loan to be processed. Even though your building may be approved by the government, the age of the building determines the tenure of your loan.
- The younger your property is, longer will be your tenure.
For instance, if the age of your building is say 15 years, and the age cap is 30 years then the maximum allowable tenure for your loan will be 15 years. Similarly, if your building is 20 years old then the maximum tenure for which you can borrow would be only 10 years.
Your loan eligibility is also decided
Your eligibility is determined by: a) income, b) property value. The valuation team from the bank will evaluate the value of your property by considering its age among other factors such as market value, location and so on.
Although real estate is an appreciating market, older buildings are generally inspected carefully before a price can be put on it. This is precisely why you need to make sure that you pledge a property which is not too old or damaged.
Renovation is a plus
Although your building may be old, if you have made renovations and reconstructions in the recent past then you are definitely at an advantage because, these help improve your loan eligibility as well as longer tenure.
II. I have patta but not approval / title deed
There have been several applicants who have had all the documents in order except probably the government approvals to their property. Sometimes, the property is inherited and back in the old days there was not too much stress on the fact that a plan needed to be approved before it can be implemented. However, banks do not view this favorably and end up rejecting the application.
There could also be some cases wherein the approval documents have been lost over time. In such cases, it is possible to apply for them again and submit the same while during application. However, claiming that you have only the patta for your property but not approvals or title deeds then your application will be rejected without much of a consideration.
III. This is not a deviation
If you are pledging an independent house of yours, then ensure that there are no large deviations or violations from the originally approved plans. There are several cases wherein the applicants have had visible deviations yet they claim that it isn’t one.
If the bank finds even the slightest of discrepancies as far as your property is concerned, your loan will be rejected up front.
IV. My siblings are not signing the loan form
This is important because, should there be co-owners they should give their consent if you want to go ahead with pledging your jointly-owned property. Now, the consent can be given either way
If your siblings are also the owners of the property you are about to pledge, then you will have to ensure that the co-owners come forward as the co-applicants. Or
They could sign an agreement with you stating that they are no longer the owners of the property in question.
See, the lending institution wants to make sure that there will be no future disputes on your pledged property during the tenure of the loan, which is why the ownership aspect needs to be cleared.
V. I have filed IT only for the past 1 year
If you are self employed, then you should have filed Income tax returns for the recent 3 years. This is mandatory if you are looking to apply for a loan against property (or even a housing loan for that matter).
However, if you have filed your returns only for the past one year but have supporting bank statements to show a steady income. Then it is accepted by certain banks after subject to other clarifications.
These are some of the common reasons, but following are some of the more specific reasons your application may be rejected.
If you are an unmarried daughter
If you are an unmarried daughter and are looking to place your property as collateral, it is not possible or rather you won’t be eligible to do so.
If the property is not in your name
In case the property is in the name of either of your parents, and you have siblings as well, then you cannot pledge such a property as collateral for your loan. At the time of the legal valuation, the title deeds will be carefully reviewed and unless the ownership of the property with the applicant, he or she will not be eligible.
If your credit score does not meet the cut off
Most often, loans against property is borrowed to pay off other major loans, which automatically means that the credit score of the individual will be affected to some extent. Although the cut-off credit score for lap applicants is not as high when compared to home loans or personal loans, but a minimum score needs to be shown in order to be eligible.
Want to see for yourself if you are eligible for availing a LAP? Get to know