How to apply for a loan against the property during bad credit

The loan against property is a process wherein the borrower needs to mortgage his/her property documents with the lender to get some liquid cash in hand. In the case of the loan against property, the borrower’s CIBIL ratings play a crucial role in accepting or rejecting the loans. The negligent person about the installments paid to the bank or the one who delays the installments gets lowered his CIBIL score. While the willful defaulters are the ones who ultimately default on the loans due to which the lender may be forced to take legal action on the borrower. The lender may charge a heavy penalty on the borrower in case of a delay in payments, while if there is a default of payment for a longer duration, then the lender may be forced to sell the borrower’s assets. The loans granted to the borrower have some deadline to repay the loan on a monthly installment basis, beyond which a penalty may be charged to the borrower. Thus it is always expected that the borrower should repay the loan installments within the stipulated time limit.

The process of applying for loans is an easy & more straightforward process. The borrower needs to submit the form filled duly signed by the applicant, a recent passport size photograph, government id proof, proof of income, property documents with clear titles. If the borrower has all the necessary documents, the borrower is most likely to get the loans approved easily and straightforwardly. The borrower who repays credit payments on time can have an excellent or good credit score, while the delayed payment making or else defaulting may lead to an average or poor CIBIL score. The applicants with good CIBIL scores are always amongst the most preferred customers to whom lending financial institutions are preferring to provide credits. Due to the fiercely competitive market, the banks & NBFC are always searching for customers to extend loans. But still, the lenders need to follow guidelines as per the company rules and as per the RBI guidelines. The mandate rule for the loans’ approval is the submission of all necessary documents, submission of ITR returns records, request of CIBIL score ratings to complete the loan process.

Following are the rules for loan against the property even during a bad credit score:

  • Clear previous debts:

The borrower should clear all his debts of the loans before applying for the new loans. In case of further application of loans, the previous loans should be removed by the lender, with no pending dues kept repaying. Once the existing loans’ full & final settlement is done with full dues repayment, the lender can apply for new loans. After clearance of previous debt, the borrower’s CIBIL score improves, thus making a straightforward way for applying for the new credits.


  • Look for loans with longer repayment tenure:

The loans being applied with the lender should be of longer tenure, thus reducing the borrower’s monthly installments. When there is a lower liability of installment on the borrower, it is easy for the borrower to repay the loans. The financial institutions are also in need of the higher loans been running to generate more increased volume business through receiving installments from the previous company being developed.


  • Keep the amount of the desirable loans low:

The amount needed to be borrowed low; then, the borrower can quickly obtain the loans. The borrower makes more of a down payment and accepts lower credit; the lender may sometimes approve the loans quickly. As the lender’s liability is joint and financial lending companies need more business, they may consider supporting the loans.


  • Opt for a joint home loan:

If the borrower applies for the loan on a joint name & if the other borrower is having a good income source and a good CIBIL score, then the loan with a collective term can get quickly be approved. The borrower with joint names can support each other to repay loans, thus making it easier for the refund.


LAP for low credit score:

The loan against the property is a safer mode of opting for loans for both the borrower and the lender. As the property documents are already mortgaged, and the loans are approved up to 60-70% of the property valuation only, there is surety amongst the lenders to recover the lender’s total loan amount. The mortgage of property can be used as a security deposit to the lender to recover the bad debt in case of default in payment.



Hence it is clear that if the borrower is applying for the loan against property, then it creates the surety for the lender to recover the loans by the seal of assets. Also, there can be multiple tricks being applied in case of poor credit score by applying for the joint loan, or else repaying the existing installments, apply for lower amount credits to make it easy for repayment or else apply for the more extended moratorium of loans with a short amount of monthly installments making it easier to repay the loans.