A loan against property (LAP) allows you to raise funds for business and personal needs on the go. As it is a secured mode of finance, lenders usually charge a lower interest rate. Having said that, there are certain mistakes that you need to avoid while opting for a loan against property, as committing them can make the loan an expensive proposition. So what are these? Let’s find out.
Not Comparing Interest Rates: It is essential to compare interest rates, irrespective of the loan you wish to avail. This is because it has a direct bearing on the monthly EMIs. In other words, the higher the interest, the greater is the EMI. So, before proceeding, it’s essential to compare the interest rates of multiple lenders and choose the most competitive one.
In the digital world, almost all lenders have their official website where they mention the interest rate. You can browse the official websites of individual lenders and find out the rate of interest. Note them down and choose the one that best suits your requirements.
Missing Out on Processing Fees and Prepayment Charges: This is another error to avoid while availing a loan against property. Note that LAP is a big-ticket loan, and therefore the processing fee matters. If it’s on the higher side, it could significantly increase the cost of borrowing.
Equally essential is to consider the prepayment charges. Prepayment charges are the one that is applied while you foreclose your loan before the actual loan tenure as per the sanction letter. Now, this foreclosure can either be from owned funds, or it can also be a balance transfer with another lender, eventually leading to foreclosure. These charges, if not taken into account, can be a cause of significant concern later. So, make sure that they are competitive.
Not Opting for the Right Tenure: The loan tenure plays a vital role in determining the EMI that you need to pay every month. It’s crucial to choose an optimum term so that the EMIs remain reasonable and you can service them without default.
Note that if you choose a long tenure, the same will reduce your EMIs. However, it will lead to a higher interest payout. Nonetheless, if you opt for a lower tenure, it will push up the EMI amount but lower your interest outgo.
You need to be prudent in your EMI choice to ensure that they are reasonable. If you opt for a short tenure, consider your present liabilities to ensure that you can serve them without missing out on other financial goals.
Giving the Disbursal Time a Miss: Disbursal time refers to the time taken to disburse the loan. The disbursal time generally takes a few days as lenders need to technically evaluate the property’s value before approving your application. So, if you need funds on a very short basis, then you should opt for a lender who can disburse the amount within the shortest possible time.
For this, you must have all the papers ready and fulfill the LAP eligibility criteria as outlined by your lender. You can get all information related to this on the website of the lender. If needed, do talk to your lender about the documents you need to provide to expedite the loan approval process.
Not Factoring in Other Liabilities: Before availing a loan against property, you must be well aware of your existing liabilities, and your debt-to-income shouldn’t be pretty high. Lenders consider this ratio to evaluate whether you can manage to repay the money you are borrowing on time or not.If you are already servicing other high-value loans, it’s advisable to opt for a loan amount that you can easily repay. Also, make sure you have a good Credit Score with the bureaus so that you get the loan approved on easy terms and conditions at a competitive interest rate. It’s not that you will not get a loan if you have a poor Credit Score. However, the same will come with strict terms and conditions and higher interest rates.
Neglecting the Terms and Conditions: A mistake that can cost you significantly in the long run.I It’s essential that you read the terms and conditions well before signing. Find out about any hidden charges, if any, and make sure you are well aware of them.
Don’t get intimidated by the financial jargon and seek help from a professional if required to understand the policies governing your loan. Also, seek clarification from your lender if you are not able to understand any clause.
With minimal documentation, Poonawalla Housing Finance offers you a loan against property at the most affordable rates with complete transparency and no hidden cost. Click here to know about the product offering and get started with this simple online application form to avail loan against property.