What are the Common Mistakes to Avoid When Applying for a Loan Against Property?

Introduction

Loan against property is one of the best options when considering to avail a substantial amount of money for various business needs. It is a secured loan given against a real estate property such as house, land, commercial building etc.

One of the biggest advantages of a loan against property is the fact that we can utilize the funds for business purpose. It is always advised to use the funds wisely because not being able to repay the loan amount will result in the loss of property after a certain point in time.

When applying for a loan against property, we must consider all the factors that are included in the process with careful planning and research.

Right Funding Partner

It is very important to do our research when applying for a loan against property. Each lender will have different terms and conditions affixed. It is up to us to consider which plan is best for us. If we properly compare the rates of interest provided by multiple financiers, we will get a fair idea of which lender to choose. We can make use of the wide range of information and detailed analysis of financiers online to do this comparison.There are various Interest rates available in Market for the same product. We have to be prudent enough by researching the interest rates offered by various financial institutions and selecting the one which is beneficial to us

It's not just about eligibility

Yes, being eligible for a loan against property is one of the primary criteria for applying and availing a LAP. We can use eligibility calculators to understand whether we stand a chance to secure a loan against our property. These calculators are available online, especially in the official websites of the financiers.

While eligibility is one of the primary criterial, the same alone will not be a deciding part of securing LAP. There are also other factors such as profile, nature of the property against which the LAP is applied are also taken into a fair consideration. Lenders assess factors like income, age, occupation and credit score when considering our application.

Nature of the property plays a considerable role in shaping up the terms of LAP. For example, the loan amount is considered based on the valuation of the property and the Loan to Value (LTV) ratio also varies based on the nature of property. The LTV for residential property normally tends to be low compared to commercial, industrial and vacant lands properties. The borrower tends to get higher loan amount when providing a residential property compared to the rest of properties.

Ignoring to choose the right repayment tenure

Not opting for the right duration to repay the loan is also a mistake many people commit while applying for and availing of a loan against property. Most lenders provide a long tenure in a LAP of almost 15 years. However, depending on the loan amount, and repayment capacity, it is up to us to choose the right tenure so that we save on interests. One thing we must always remember that the longer the tenure the lesser the monthly EMI, but the higher the interest cost– we will be ending up paying way too much interest for the principal amount.

Two key factors to be considered while applying and availing the loan. One is the age of the borrower and the other is the loan amount. Our loan must be aligned with our present personal liabilities and financial objectives with helps in smooth repayment of the EMI.

Not maintaining a proper credit score

Maintaining a healthy financial stand is crucial when applying for a loan from a financier. If we have a good credit history and a fair CIBIL score, it is easier to avail a loan and the terms of the loan can be more viable and beneficial to us. The better the credit score, the lower the interest rates and higher the probability of securing the loan.

Blindsiding the fine print

Every financier will have a set of terms and conditions that is written in fine print and hand over to us to READ and sign. One major mistake many of us commonly commit is not to read those fine lines. These terms and conditions will contain all the hidden charges, potential costs and material facts. Reading these terms can help us to make a better decision and enhance our ability to negotiate with the lender.

Ignoring the required prerequisites

While applying for loan against property, one should ensure that they have all the required set of documents which includes property documents, address proof and ID proof, income related documents are kept handy. Availability of these documents will help in quicker and hassle-free loan processing process.

Planning of repayment.

It is easy to avail of a loan but it takes efforts to repay the same on time. Timely payment of our EMIs is the key which not only ensures to be in a good book with the lender but also marks our credibility which will eventually help in maintaining good credit score and more provide more opportunity to borrow funds and borrow at lower rate of interest One should be mindful of the repayment and always choose the loan amount based on the convenient EMI to repay. This ensures smooth repayment of the loan

Skipping loan insurance

Never skip on the loan insurance. In case of uncertainties, without a loan insurance, we pass the burden of repayment of loan to our family and there is also a possibility of losing the asset due to non-payment of the loan. A loan insurance will turn out to be a saviorsaviour to our family during these times.

Why should you choose Chola for your mortgage loan?

Disclaimer: The above information furnished is generic in nature and can be considered for informational purposes only. The interest rates, if mentioned in the article, can be volatile and subject to change. Please feel free to contact us for exact information on our products.