A loan against property is a secured form of credit that allows property owners to avail substantial funds by pledging a residential or commercial property as collateral. Being a secured loan, lenders usually offer lower interest rates than an unsecured loan and make a lenient approach while evaluating borrowers’ creditworthiness and repayment capability.
However, borrowers often make different mistakes when applying for loan against property, which hampers their loan application process. Also, they tend to suffer throughout the loan tenor as well, owing to that.
Mistakes to avoid while availing loan against property
As already mentioned loan against property is a secured credit facility through which one can meet their essential financial requirements. Following are some of the mistakes that one needs to be informed of while applying for a loan against property:
Not comparing interest rates
One of the most common mistakes repeated by borrowers is not doing a proper loan against property interest rates comparison. Every financial institution, NBFCs or HFCs, have their fixed interest rates and eligibility parameters. If individuals do not compare these factors properly, they will end up paying more money in the form of interest amount. Usually, most people fail to assess the interest rates owing to a hurry in availing of this financial product. But they fail to understand that they end up paying a lot of extra amount during the entire repayment process.
In this scenario, one can opt for a balance transfer facility where individuals can explore different financial lenders available in the market. By researching thoroughly, one can settle down for the best option that will suit their financial requirement.
Not evaluating loan EMIs
It is crucial that one should not default his/her EMIs against their loan. In such cases, it is wise to assess monthly eligibility and the capability of repaying the loan amount. After this, borrowers can decide the amount they can avail of based on their eligibility. If a borrower finds out that they can’t afford to pay higher EMIs, they should not opt for a higher loan amount even if the property is eligible to get a substantial amount.
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Not assessing prepayment terms
Another common mistake here is that individuals often overlook prepayment terms and conditions properly. Resultantly, they often end up bearing heavy prepayment charges. To avoid this situation, one should examine the prepayment terms and conditions before applying for a loan against property. Further, if one wishes to pay off the loan earlier, it is wise to opt for a lender that offers such provision without asking for any extra charges.
Not paying attention to the pre-requisites
If a borrower owns a property, it does not make them eligible for a loan. Often application gets rejected because the borrowers fail to meet loan against property eligibility criteria or are unable to produce necessary documents. To ensure a hassle-free loan approval, one needs to go through the qualifying parameters of the lenders and arrange the documents as per requirement.
Not considering other charges
Apart from EMI, a lending institution may have hidden charges such as processing fees, conversion, inspection and documentation fees etc. Therefore, it is essential to consider these extra charges before availing loan against property, to keep the total cost of borrowing in check.
Not considering disbursal time
Usually, disbursal of property loans takes at least two to three weeks as financial lenders need to verify all the property-related documents and conduct an inspection to thoroughly assess the property’s market value before approving an application. If a borrower requires emergency funds, LAP may not be an ideal choice for them. Such borrowers can opt for other financing options that involve shorter processing and disbursal time.
Borrowers applying for LAP from reputed financial institutions can also avail of pre-approved offers extended by them to simplify and accelerate the loaning procedure. These exclusive offers are available on a wide range of financing options such as loan against property, home loan etc. Therefore, prospective borrowers can check their pre-approved offers by mentioning their name and contact information.
Hence, to conclude, borrowers must avoid these mistakes and assess all the factors before applying for a loan against property. One must also keep the necessary documents aligned to ensure a smooth application process.