Loans are required now and then for multiple reasons. There are many types of loans offered by a lender so that borrowers can choose the best as per their will. Sometimes the amount required is minimal, while at other times, the demand can be very high. There comes a need to avail a loan that is easy to get approved and offers low-interest rates.
One such secured loan is a loan against property that is provided against residential or commercial property. You get financial aid when you leverage your property. Lenders mortgage your property like your home or office, and you get to avail of a lump-sum amount.
Why should you go for a Loan Against Property?
LAP enables you to use the value of your property. However, it does not restrict you from using it during your loan tenure. Below are some advantages you can avail of if you go for a loan against your locked up rich property.
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Lower Interest Rates
The property loan interest rate is comparatively lower than any other loan type.
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Is Easily Available
These loans are readily available as a lender gets ultimate security by keeping the property as collateral.
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Offers You a Lump Sum Amount
As you avail of the loan by leveraging your property, you can demand a higher loan amount to meet your finances in business.
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Flexible Repayments
The EMI is also low repayment is confident; therefore, the repayment is flexible.
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You Can Use Them for Any Purpose
These loans can be taken to fulfil multiple requirements, be it business-related or confidential.
5 Golden Rules to Keep in Mind
Opting for a loan against property can be beneficial; however, you must consider these five golden rules.
1. Know your Financial Situation
Use EMI calculators online to know the monthly repayment amount and evaluate if it’s manageable. The EMI depends on the property loan interest rate, tenure and amount. Your EMI should not be more than 50% of your income to keep things manageable. Always evaluate your repayment capabilities before you apply for larger amounts.
2. Go for a Shorter Loan Repayment Tenure
A loan against property is available for a tenure of up to 15 years. You can choose the repayment tenure as per your wish. If you go for a longer repayment tenure which leads to shorter EMI, which no doubt seems very attractive. However, longer terms might charge you higher interest rates with time.
If you go for lower tenure, the EMI will increase. Choose your repayment tenure depending on how much financial pressure you can take. If you are financially unstable when you apply for a loan, inspect the prepayment charges the lender takes to increase the EMI later.
3. Make Sure You Make Timely Repayments
Use loan against property calculator to calculate your EMI and always make repayment on time. Delay in repayment might cost you some penalty and will affect your credit score. A credit score shows your creditworthiness. A negative impact on the score might make it difficult for you to avail of loans in the future. Maintaining a good and timely repayment will add to your score and will increase your creditworthiness.
4. When Borrowing a Larger Amount Do Avail of Insurance
It is highly recommended that you go for insurance if the loan amount borrowed is high. In a property-based loan, the tenure is long, and insurance covers if any mishappening takes place. The inability to repay the loan will cost your property.
There will be a considerable amount of money to be paid back, and insurance will help your family financially. If you do not avail of insurance, then the property will be snatched by the lender.
5. Go through Terms and Conditions Carefully
There is a lot of paperwork involved regarding loans, and therefore we tend not to pay attention to it. This ignorance might startle you in future with some hidden charges and penalties. Make sure you thoroughly read all the terms and conditions to not face any problems in future.
The lender will ask you to submit some documents before moving further with the sanctioning process. The essential documents are:
- Duly Filled Application Form
- Identity Proof
- Residence Proof
- Income Proof
- Photograph and Signature
- Property Documents
Signing Off
Be completely mindful and prudent with your choices when applying for a loan against your hard-earned property. When you do it sensibly, you reap all the benefits appropriately.
