Loan Against Property: Few things to know before applying for a loan

Do you wish to send your child overseas to pursue their dream education? Or maybe planning a long vacation to the dream destination? Else, there are plans for business expansion on your to-do-list? Is there a worry to arrange such a big amount to make your dreams come true? If yes, then Loan against Property will be an ideal solution to meet all your financial goals.

Loan against property is convenient and easy means to get quick access to funds through leading banks and private finance companies at a lower rate of interest. As the name suggests you can use your property to get access to the funds from the lenders. Since you keep your property mortgaged it’s a secure type of loan that offers a longer tenure and smaller interest rates compared to traditional finance or personal loans.

Although it’s a safe bet, however, it’s better to keep these few things in mind before you sign on the dotted lines:

Don't borrow more than required:

It is advisable just because you qualify for more doesn't mean you have to take the entire amount. As per a basic thumb rule, your monthly EMI shouldn't exceed 50% of your income. Else, if there is an issue in future like job loss, recession, rising inflation, etc. it becomes more or less impossible to make repayment and you'll start coming under defaulter list.

Shorter Tenure:

Loan Against property comes for the tenure of around 15 years and lenders offer you lower monthly installments across the time span. But in the long run, one forgets he or she ends up paying more interest rates than you would pay for loans with shorter tenures. It’s better to keep your monthly installment on slightly higher amount every year in line with your appraisals, incentives, pay & perks. Even a slight increase in monthly installments will shorten your loan tenure and lessen the burden on you.

Timely Payments:

No making your payments on time will lead to non-payment penalties and they can have a deeper impact on your credit score which thereby diminishes the chances of availing a loan in future. So, you should be much disciplined and make your payments on time. Any late payment affects your credit score and fuels for bad score reputation. Late penalties are only adding to the cost of your repayments making it an expensive deal at the close.

Ensure it:

Loan against property is still a huge loan just like home loans. So, its advisable to take an insurance cover because if you were to meet any unfortunate incidence and perish from the world, then the burden of repayment will come straight on your family members. Lenders will generally pitch for term cover equivalent to outstanding amount else you can take a separate term cover which will continue after loan repayments or even if you plan for a switch to another lender.

Read the Fine Prints:

Loan documents have a lot of terms and conditions which usually is a boring stuff to read. However, it’s imperative you go through the policies, terms, and condition to understand the fine prints. This way you'll come across hidden charges such as administrative, processing, foreclosure, cheque bounce, etc. and their deadlines. So, make sure you go through it well.

No tax benefits:

Unlike other loans such as housing loans, a loan against property will not help you avail tax benefits. So, bear this in mind and apply for a loan against property online a convenient and easy way to get loan sitting at the cozy corners of your homes or offices.

Hi, I am Anurag Mishra working with Home Finance company as Home Loan adviser owing good knowledge of Home loan, Home Loans, Home Loan Balance Transfer, Mortgage Loan, Property Loan and Personal Loan so on.