There are numerous factors that banks take into consideration when computing your loan eligibility. Age of the applicant, his salary, repayment/credit history, savings, profession, location of property, health condition and other debts have a direct bearing on the loan amount sanctioned. With property prices sky rocketing one needs the maximum possible loan. Under how you can improve your loan eligibility
The ideal candidate for a loan from a lender’s
viewpoints would read like this - "Age between 24 and 45. Well educated professional.
Expenses should not be more than 50% of income. Ideally must work for government services
or a large corporate though self employed will be considered. A credit score greater than
750." Even if you fit in all the criteria there are several factors on which your
loan eligibility will be decided.
Your bank will assess your repayment capacity while
deciding the home loan eligibility. Repayment capacity is based on your monthly disposable
/ surplus income, (which in turn is based on factors such as total monthly income /
surplus less monthly expenses) and other factors like spouse's income, assets,
liabilities, stability of income etc. The main concern of the bank is to make sure that
you comfortably repay the loan on time and ensure end use. The higher the monthly
disposable income, higher will be the amount you will be eligible for loan. Typically a
bank assumes that about 55-60 % of your monthly disposable / surplus income is available
for repayment of loan. However, some banks calculate the income available for EMI payments
based on an individual’s gross income and not on his disposable income.
The amount of the loan depends on the tenure of the loan
and the rate of interest also as these variables determine your monthly outgo / outflow
which in turn depends on your disposable income. Banks generally fix an upper age limit
for home loan applicants.
Increase loan eligibility...
Get a better Cibil credit rating
A better Cibil score helps the bank look at your
application in a more favorable light. It will not just decrease you the rate of interest
that the bank charges you but also likely to increase your loan eligibility.
Two are better than one
If your spouse is also earning, the income of your spouse
can be combined and you could applied jointly for the loan. You can also club incomes with
a parent to take a joint home loan.
Pay off older loans
Since amount you are eligible for is a function of your
disposable income, you could repay any previous loan to increase your eligibility as this
will increase your disposable income.
Go in for a longer tenure loan
A longer tenure loan will increase the amount that you are
eligible to borrow. A longer tenure will also mean that you pay a more interest over the
years and hence this not really advisable except as a last resort.
Step up option (SURF)
For young professionals Step up option works well in
increasing their loan eligibility. A step-up loan is one in which a bank or a financial
institution lends money taking into account the borrower's future income. The lender
decides the loan amount for which an individual is eligible on the basis of the borrower's
expected professional growth. In this way, a borrower qualifies for a larger loan amount
even if her/his present salary is low.
Nurture your relationship
If you have a long standing relationship with the bank, you
may be able to convince them about the increase in future income and your repayment
capacity. Also if you work for a large corporation, the bank may give you preferential
terms including higher loan eligibility.
Some of the important aspects which will affect your loan
- Your income
- Category of the company you work
- Other fixed payments
- If a home loan then property attributes for example most
banks will not fund a property without a clear tittle
- Your and your co-applicant age should cross over 65 years
during the tenure of the loan.
- Tenure of the loan and rate of interest
The author is Co-Founder & Director, CreditVidya
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