Ask Mint | Loan eligibility mainly depends on borrower’s repayment capacity

Ask Mint | Loan eligibility mainly depends on borrower’s repayment capacity

One of the leading banks has sanctioned me a loan of around 70% of the agreement value. In case I give additional collateral in the form of my insurance policies and a small property of about 250 sq. ft in Goa, will it increase my loan eligibility?

Loan eligibility is essentially determined on the basis of the repayment capacity of the borrower. A number of factors are taken into account when assessing the repayment capacity such as income, age, qualifications, work experience, number of dependants, job profile, spouse’s income (if any), assets, liabilities, continuity of occupation and savings history.

Since you have been sanctioned 70% of the agreement value, it could be primarily based on your repayment capacity. You need to understand that providing additional security such as insurance policies and other properties at the loan application stage may help, but only to a minimal extent. It may not have a substantial impact in terms of enhancing your eligibility, if according to the bank your repayment capacity allows you only up to 70%. However, you may want to approach the bank again to clarify and, maybe, request them for a possible increase in the loan amount if repayment capacity is not the issue.

My wife owns a plot of land. I want to take a home loan in my name and construct a house on that plot. Is that possible? Can I claim tax benefits on it?

Yes, several lenders do provide loans for construction of residential premises on a plot of land. However, in your case, since your wife owns the plot, you will get a housing loan for the construction only if your wife is a co-applicant to the housing loan. The tax treatment would be similar to that of a normal housing loan. However, we recommend that you consult your tax expert with regards to tax planning.

Renu Sud Karnad is joint managing director, HDFC.

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