India is a rapidly developing economy with unlimited opportunities to expand your business or fulfilling your long held dreams are available like never before. For the business community, business expansion through manpower addition, new equipment purchase or entering a new vertical are long held dreams. Similarly, for salaried individuals buying a new vehicle, paying existing debts or home renovation etc are causes held dear to them.
For fulfilling all these dreams one requires a cash flow. During these times of need one can easily utilize his latent asset like property to get a Loan against Property eligibility. LAP is one of the easiest options to get easy financing for your needs. It offers twin benefits of lower Rate of Interests and Longer tenures compared to other options like working capital Loans or Personal Loans.
Although, property offered in this loan makes it a secure product but your eligibility would still be calculated based on your periodic cash flow generation through your business or job you are currently employed with, previous repayment history, business vintage etc. LoanKuber has prepared an exhaustive list on how Banks calculates loan against property eligibility –
- Industry Margins – Usually banks follow this method to calculate net income for those business whose Industry Margins are well defined and a historical data is well maintained. Experts from banks visits customer’s premise and observe their daily sales and footfalls. They arrive at a rough income calculation for customer and tally it with official documents filed by customers like Average Banking Balance, financial statements, Income Tax returns, stock positions etc. Your final loan amount on loan against property eligibility would depend upon all these factors.
- Net Profit – Financial statements provided by business owners like Profit and Loss statement, retained earnings, balance Sheet would help Banks in calculate Net profit for the years for a business. Banks usually look for steady and gradual increase in Net profit of business over the years. If there are huge variations in either Sales or Net Profit over the years, then these changes must be explained to credit officer satisfactorily.
- Existing Repayment Record – Banks and NBFCs also look into repayment track record of existing loans like Term Loan or Home Loan. If good repayment behavior is observed over a longer duration then banks provide a Top up facility to the customers. You would get increase amount over and above your existing Loan.
- Income Policies – Banks and NBFCs have certain policies to consider income for a customer. Every income source should be backed by a clear business model, Income Tax receipts, Sale and Purchase documents etc. Certain incomes like rental income, income from trading securities on stock exchanges, lottery etc are not considered as a legal source of income.
- Business Vintage – It plays an important part in self employed profile for a customer. Usually, banks don’t lend to a business profile having less than 3-5 years of continuing operations in current business.
- FOIR – Most banks calculate eligibility on their EMI calculators for Loan against Property with FOIR. FOIR stands for Fixed Obligations to Income Ratio. While calculating FOIR, Banks take into account all your fixed obligations like monthly EMI on term loan, LAP etc. Statutory deductions like provident fund, professional tax and deduction for investments like fixed deposits are not taken into account while calculating FOIR. Usually, banks offers a FOIR of 30-50% on LAP. You can yourself calculate your approximate monthly emi by calculating your FOIR for your monthly income.
- Average banking balance – Banks usually looks for an Average Banking balance to be twice of EMI for LAP.
- Customer Profile – Lending institutions also looks into subjective parameters like Lifestyle, Age profile, Family background, number of dependents etc to ascertain customer’s loan against property eligibility.
In addition to the above points, needless to say parameters related to property like Legal sanctity of property, Technical valuation report, Current market value of the property etc also plays an crucial role in determining customer’s loan against property eligibility.
Loan against Property is one of the quickest and easiest method to generate cash flow for your business and personal needs. We at LoanKuber can assist you in getting your dream fulfilled of getting a loan against property eligibility at easier terms for your business needs.