Personal Finance

Get banks to lend you more

K Venkatasubramanian | Updated on December 14, 2014

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When you are young, take the maximum tenure for a higher loan amount

Looked around for home loans and found that all banks are willing to lend you much less than the rosy amount that you want? Well, there are ways to get the banks to lend you more — all legally, of course — if you present your financial status in a smarter way.

Banks, before they lend to you, look at your salary slips, income tax returns and other financial documents to assess how much you actually take home, and then decide on your loan eligibility.

Given that income tax returns are also part of the documentation process, you cannot hope to pad up your income under imaginary heads, unless it actually shows up in your returns. While bonuses and variable payments would be added to your salary, reimbursements or certain allowances may not be counted by some banks for assessing your loan eligibility. So, are we getting your hopes up to no avail? No! Here are some simple ways to get the bank to lend you more.

Lengthen the period

Now, let us say, you are eligible for a loan of ₹50 lakh for a period of 15 years at an interest rate of 10.25 per cent. The EMI would be a little under ₹55,000. Now, if you actually increase the loan repayment period to 25 years, you are likely to be eligible for ₹60 lakh. Your EMI remains almost the same at a little over ₹55,000 and, therefore, still affordable.

So you end up getting ₹10 lakh more (in this case), which would ease the burden on your liquidity as you would not have to fork out more. Given that the EMI remains the same, the bank or lender too would be inclined to offer more. When you are young or just a few years into your career, it makes more sense to take a loan that offers the maximum tenure.

Add on applicants

Adding more loan applicants is an easier way out. When a home loan is applied for jointly, adding the income of your spouse or working parent would mean higher surplus, and therefore the chances of higher loan eligibility.

Collectively, loan eligibility may go up dramatically. If you are borrowing for a ‘ready to occupy’ apartment, which is to be let out, you can include the potential rental income that you are likely to get from the property.

This, again, means that your total disposable income increases, enhancing your chances for a larger loan amount. Of course, this does not work well for properties under construction that might take a longer time for possession. It may be hard to project potential rentals.

Another reason for lower home loans is that you may already have a vehicle/education/personal or any other loan running.

From your take home pay, the lender would reduce the existing loan EMI to arrive at your ability to repay.

Juggle other loans

So, repay other loans as soon as you have a surplus or get a large bonus. If full repayment is not possible, you can increase the tenure of those loans, if the bank or lender allows it.

This would lower your EMIs and free up more of your cash. So, a three-year car loan can be increased to a five-year period. This will ensure that the monthly outgo is reduced significantly. Depending on the specific cases, banks do extend vehicle loans even up to seven years.

Published on December 14, 2014

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