Can I Apply for a Loan Against Property without ITR?
If you are facing financial difficulties, one of the options that you have at your disposal is a bank loan. However, you should really keep the interest cost on the lower side as a high interest rate can in turn push you towards a debt trap.
As such, opting for a Secured Loan can be beneficial for your financial situation. If you own a property, residential or commercial, availing a Loan Against Property provides you the required monetary support in a better way as compared to a Personal Loan or using a Credit Card.
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Essentials of a Loan Against Property
A Loan Against Property is a secured credit facility wherein you pledge your property with the lender in lieu of the required loan amount. As this loan is secured against the mortgage of a property, the risk for the lender is reduced. Consequently, the Loan Against Property interest Rates are much lower than other credit facilities.
Here are some of the essential aspects of a Loan Against Property that you must know:
- The maximum available amount can go up to 70% of the market value of the property.
- Maximum repayment tenor can extend up to 15 years.
- Attractive interest rates as compared to unsecured loans such as Personal Loan, Overdraft or Credit Card advance.
- The option of a Top-Up loan is also available with certain lenders.
- Option to foreclose the loan is also available.
- Lower processing charges as compared to other loan options.
Importance of Income Tax Return (ITR) for Availing a Loan
There are several types of loans available in the market for different financial requirements of the customers. But there is one thing common amongst all the loans i.e., their approval is subject to the repayment capacity of the borrower. This eligibility can be established only through the document that acts as your income proof, i.e., your Income Tax Returns (ITR). Even if your income falls below the minimum threshold of ITR filing, still filing a “NIL” tax return is highly advisable.
The income mentioned in your income tax return is the final income considered by a lender while assessing the eligibility for a loan. Income Tax Return consists of all the details regarding your income during the year from multiple sources. Combined with the Computation of Income Statement (COI), it provides the lenders with an insight into your finances. This is the reason as to why most lenders compulsorily require the ITR of the last two or three years for processing a loan application.
Loan Against Property without Income Tax Return (ITR)
While it is extremely important for a loan applicant to submit his/ her ITR with the lender, there are certain situations when the applicant might not be able to submit the income tax return. If it would have been any unsecured loan, the application might be rejected straightaway. But if you are applying for a secured loan like a Loan Against Property, it might be possible for you to be eligible for the loan, albeit subject to certain conditions.
Here are some useful tips to help you avail a Loan Against Property without ITR:
- Get a co-applicant: If the property to be mortgaged is registered in your name and you do not have your ITR, then you can add a co-applicant to your loan application. The co-applicant must be a tax-payer and should be filing the ITR for at least the last three years. If the co-applicant is a salaried individual, then your eligibility for the LAP would increase substantially. Additionally, the co-applicant should meet the other eligibility criteria of the lender as well. The co-applicant can be a spouse, parent, or sibling and should be made the primary applicant to the loan application.
- Prove your rental income: If the property against which you are seeking a Loan Against Property has been leased out to a multinational corporation or a government department, then you might be eligible for a LAP without ITR as well. Herein, you will need to execute a tripartite agreement with the lessee and the lending institution. After the agreement, the lease payment will be transferred directly to the lender as EMI. The lender will calculate your eligibility for the loan based on the future rental income for a certain period.
- Submit your financial statements: In the absence of ITR, you can submit other documents to establish your income to the lender. Bank statements, net worth statements, shares, mutual funds, or details of other sources of income can be used to explain your repayment capacity. These statements must be approved by a Chartered Accountant.
- Opt for a lower LTV Ratio: After you have submitted other sources of income as well as the property documents, another way to improve your eligibility in the absence of the ITR is to opt for a lower LTV ratio. This will reduce the risk for the lender and can, in turn, allow you to avail the required loan amount. For instance, when you apply for an SBI Loan Against Property, the bank follows an LTV of 65% for amounts of up to Rs 1 crore and 60% for amounts above Rs 1 crore. You can opt for lesser amount say, 50% of the value of property to improve your eligibility.
- File your Income Tax Return: If you have not submitted your ITR yet, it is still not too late. In case of a LAP, most lenders require the ITR and COI for two years only. Get hold of a Chartered Accountant and file your income tax return for the last two years at the earliest. If your income is lower than the minimum income tax slab, you need not pay any tax as well. Though a late filing penalty might be applicable. But it will significantly improve your Eligibility for a Loan Against Property.
Having income tax returns and other financial documents are imperative to be eligible for a Loan Against Property. Though, if you do not have the ITR with you, the above-mentioned tips will certainly help you avail the required loan amount without any hassles.
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