Mistakes To Avoid While Taking Loan Against Property

Mistakes to avoid while taking a Loan against Property

30 Dec 2020
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At some point in life, all of us face cash flow challenges; some may need cash for personal use, while others may need funds for their business. In such times, opting for a loan against property might be worthwhile as it will give you greater borrowing ability compared to any unsecured loans, such as personal loans. You can overcome any cash crunch with a loan against property especially that which needs a substantial sum. A Bajaj Housing Finance Loan Against Property will fund it all, be it for your child's wedding, overseas education or business venture. However, keeping control of the precious property you have promised is the secret to a financially secure life, which is much easier to do when you have your priorities in order. Look at what you need to consider when taking out a loan against property.

What is a Loan Against Property (LAP)?

A Loan Against Property (LAP) is a secured loan issued against a home, flat, apartment, office, or shop for a residential or commercial property. The land serves as a collateral with a valid and marketable title and must be self-owned. This form of loan can be used for business expansion financing or for personal reasons, such as marriage, medical emergencies, etc. Your salary, credit history, and the present value of the property are some of the important factors that lenders take into account to assess your loan against property eligibility.

But since this means holding at risk, one of your most valuable belongings, it is important to be meticulous with the procedure and leave no space for mistakes.

● Comprehend the stakes

While it is necessary to finance the medical requirements of your family, pay for your new business asset, buy a new home for your newlywed children or finance the medical studies of your child in Canada, it’s also important to avoid haste. Understand the commodity you are going to pledge to the lender in return for funds. You need to avoid weighing the pros and cons of your financial decision, even if you can pledge a piece of land, residential property, or commercial property. Note that the real estate market is on a long-term upswing. So, evaluate how affordable the loan against property is for you to ensure that if you do not repay the loan, you don't miss out on a valuable asset. Knowing the worth of your property is also critical. In this way, you can secure a better deal from a private sector bank that generally provides up to 75% of the value of the property or from a public bank that typically penalizes up to 65% of the value of the property.

● Assess your eligibility and have your paperwork ready

You are also expected to meet the loan against property eligibility requirements, even if you pledge your property in exchange for cash before repayment. Lenders look at your age, salary, established financial obligations, repayment and credit history, and the property value according to the current market rates to measure your loan against property eligibility. Don't forget that your loan against property would enable all co-owners of the property to affirm their agreement on the pledging of this asset. To prove your qualifications, you will also need to send papers, which is why it is best if you have them ready beforehand. Your personal records, including name, income and address evidence, as well as those of the house, will include these documents.

● Select better loan against property interest rates and shorter tenure

Get the most affordable bid for your asset when considering a loan against property. Choose between floating and fixed interest rates by keeping an eye on the volatility and forecasts of the economy. Although a slight change in an interest rate will not seem like much in the long run, it can affect the stability and repayment of the loan. You may also select a shorter tenure by seeking a nominal interest rate. This will reduce your loan against property interest rates and help you get debt-free faster. You can take years out of your repayment schedule with a shorter tenure and higher EMIs!

●  For a sound repayment schedule, forecast your expenses

It is not necessary to only find the best loan against property interest rate. You will need to arrange your repayment in advance and have a plan in place to repay the amount you lent. To see the overall interest you will pay over the years, use a loan against property EMI calculator while also calculating the optimal EMI as per your salary. Factor in your monthly expenses and your current financial commitments to guarantee that the repayment does not stress or overwhelm you with more than you can afford.

● Pay attention to the terms of repayment and fine print

Read the repayment terms, considering the hurry or monotony of the paperwork. In the fine print, grasp the words. Will you be paid an additional fee for the foreclosure of your loan against property? For part-prepayments, is there an additional charge? Reviewing the fine print will help you ensure that you negotiate with the right lender, find any hidden fees that can impact your affordability, and help you remain careful about any potential costs you may incur.

A loan against property is a perfect way to raise funds when you face a cash crunch. The equity concealed in your property gets unlocked so you should wisely use this avenue to make sure your loan application warrants approval.

If you are looking for further financial aid, in these tough times, you can benefit from the Bajaj Housing Finance Loan Against Property, available on Finserv MARKETS. The loans come with a range of benefits, like instant approval, flexible repayment tenures and attractive interest rates.

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