At some point or the other, most people face cashflow issues. The issues can be a family emergency or to expand a business. At such times loan against property (LAP), also known as a mortgage loan is the best option because you can get a higher loan amount. Loan against property is a secured loan, meaning a borrower must pledge a residential or commercial property as collateral. Higher the value of the property higher the loan amount a borrower can get. The LAP also do not come with any end usage restriction because the loan amount can be used for any purpose. However, few people are unaware of the loan against property and might commit a mistake while availing a loan. So, here are the few mistakes which one should avoid while taking LAP:-
- Not choosing a reliable lender- Not to land up in a fraud situation it is better to avail a loan from a reliable lender. Always check a ranking of a lender before filling up an application form.
- Not comparing interest rate- The gold mantra to be debt-free soon is to research, compare, and decide. Always compare the interest rates provided by different lenders and choose the lowest as it would mean lower EMI. There are many online market places on which you can easily compare the rate of interest.
- Not checking the eligibility criteria– A lender approves the loan only if the borrower fulfils the eligibility criteria. Every bank’s eligibility criteria are different, but the general factors that every bank considers are age, minimum income, the value of the property, etc.
- Selecting a longer tenure– Longer tenure means lower EMI, but it is also essential to know that longer tenure means you end up paying more interest to the bank. Choose a tenure with which you are comfortable if you can repay the loan soon then choose a shorter tenure to save money on interest and get the hold of your property again.
- Not knowing the loan sanction time– If you want a loan in urgency, then mortgage loan cannot be a good option because the approval time is more than other loans. A lender does a property and documentation verification, and then they approve the loan. Generally, loan sanctioning takes 7-14 days in LAP.
- Ignoring your credit score– A favourable credit score can help you in a long way. Loan against property is a secured loan, but the credit score is considered while taking the loan. It can help you get a loan on many terms, and it also increases the chances of getting a loan approved.
- Not providing correct documents– Provide the authentic documents to the lender and check thoroughly before submitting the documents to a lender. Submitting the correct documents can save a lot of time, decreasing the chances of loan rejection. Also, keep the loan documents and agreements safely after the loan amount is disbursed in the account. A borrower has to submit the following documents:-
- Income Proof- last three month’s payslip, six months bank statement and last two years ITR form
- Identity Proof- Passport, driving license, aadhar card, PAN card
- Date of birth Proof- Birth certificate, SSC mark sheet
- Address Proof- Electricity bills, phone bills (latest), Passport, Gas bill
- Property documents of the property which is kept as collateral
- Not reading terms and condition– Always, remember always read the terms and condition carefully before availing of a loan. Only interest rate is not the kind of charge charged by a lender but also processing fees, foreclosure charges and other hidden charges. So, if you do not want to land into trouble later, it is better to read the loan conditions beforehand. It will also give you the information about defaulting loan.
Bottom line: Loan against property is a great way to solve your financial crunch but always keep these points in mind to avoid landing yourself in a problem. To be on a safer side use Loan Against Property eligibility calculator which helps you check your eligibility for the same. There are various online marketplaces which help you check the eligibility quickly.