Tuesday, November 20, 2018

4 mistakes to avoid when applying for a loan against property


You can use a loan against property to consolidate debt, purchase a home for your parents, start or fund your business, pay for a wedding and so much more. Whatever your reason to take a loan against property may be, it is essential you carefully understand all the terms involved and plan your finances thoroughly. This will ensure that you have a pleasant loan borrowing experience and can clear your debt in a smooth, stress-free manner.

You can plan your loan against property like an expert even if you are taking this loan for the first time by avoiding some common, frequently-made mistakes. Take a look at the 4 that top this list below.

Don’t make a Hasty Decision

While you may think that approaching your bank for a loan against property is the best option, it is essential that you explore and evaluate several offers. This will allow you to understand prevalent interest rates better. Check the loan against property eligibility set by each lender to gauge the lowest interest rate you may be able to avail. As a result, it ensures that your loan borrowing is inexpensive, and you will be able to clear the loan comfortably.

Also, instead of just approaching banks, consider NBFCs too. For instance, Bajaj Finserv offers a Loan Against Property of up to Rs.1 crore is you are a salaried individual and of up to Rs.3.5 crore if you are a self-employed individual. You can avail this at a nominal interest rate and gain from doorstep documentation pick up, minimal part pre-payment charges and foreclosure charges, easy and quick disbursal and a Flexi Hybrid facility that allows you to borrow as you need and pay interest only on the amount that you use. While you are researching various loan offerings, remember to check for the mortgage loan documents required by the lender you are applying with as well.

Don’t Ignore other Existing Liabilities

While you may consider the value of your property to be enough to get you a good loan, you also need to consider other aspects of your financial situation such as existing debt and obligations. If you already have taken a loan or are using multiple credit cards, ensure timely repayments towards the same as this can affect your credit score and in turn your loan against property application. Additionally, check whether applying for a loan against property will put unnecessary strain on your finances given your current responsibilities. This will help you decide whether you should borrow now or later, and also help you select the loan amount and tenor wisely.

Don’t be Ignorant of Pre-Payment Terms

While you may need funds urgently, it is essential that you check pre-payment terms before signing any loan paperwork. This is because many financial institutions charge you for pre-payment or foreclosure, which reduces the benefit that you can enjoy from this option. So, check before proceeding especially if you’re considering making part pre-payments multiple times through the tenor. If the lender is levying charges on these options, use a foreclosure calculator to see exactly how much you are likely to save.

Don’t skip EMI Calculation

This step is the most important. Calculating your EMIs beforehand can help you judge the affordability of the loan and also choose the right tenor and loan amount. Use an online EMI calculator to tweak different values of tenor and loan amount and see how your EMI will vary. In addition, by using this calculator you can see the total amount you are going to pay as interest. This will help ensure that you don’t over or under borrow, and that you choose a tenor and principal amount that you can comfortably repay without risking defaulting. Moreover, it will ensure that you pick a loan with an affordable interest rate.

While familiarising yourself with the loan against property features, also keep the above pointers in mind to ensure a pleasant and convenient loan borrowing experience.

Author: verified_user