Willing to Avail a Loan Against Property? Here’s How to Make The Most of it

The fact that property is an asset is well known. People tend to use it as a place to live or to rent and earn. The property also gives us an option to borrow a good amount of money with the help of a loan against property or LAP. A loan against property is a secured and collateral-based loan. One can take a loan at a certain percentage of their property’s market value without having any limitation on the end-use of the property. However, in order to make the best out of your loan against property, the following things should be well insured:

Compare all lenders and know the market trends:

A LAP is offered by a number of lenders like Bank and NBFCs. The terms and conditions on the LAP may vary across all lenders, and so does the interest rates and other charges like processing fee, and loan to value ratio. Therefore, before opting a loan from any lender, consider a comparison with other lenders as well. This will give a clear insight into the ongoing market trends, and would also help one to make an affordable deal. The borrower must borrow the loan from a lender based on criteria that best suits his or her need. 

Consider borrowing the loan amount as per the requirement:

Another thing to keep an eye on is the loan amount. To make the best use of your loan against property, use it wisely to enhance your credit score. This, however can be done, by keeping the loan amount in check. As mentioned above, a Loan against property allows one to borrow a huge sum of money. This often leads to borrowing more funds than actually required. Over borrowing the loan, can also create additional responsibilities, and can even lead to loan defaults. This can indeed lower the credit score instead of boosting it. Also, one must not forget the fact that a LAP is a secured loan; thus, the failure of loan repayment can even put the asset mortgage at risk. Thus, one must always borrow as and when required. 

Consider loan tenure that makes repayment easily:

Usually, the Loans against property are taken for a huge sum of money and a longer period. The maximum fund that can be borrowed against one’s property is Rs 50 crore and for a maximum tenure of 15 years. A large amount of sum borrowed, allows the LAP borrowers to borrow funds for a larger period. This adds to the benefit of the borrower. This is because a longer loan repayment span means a lower LAP EMI to be paid. This helps the borrower to repay the loans easily, because longer time frames allows the borrower to easily arrange smaller funds in installments. Also, during a long span, funds can be easily rearranged for foreclosure or prepayments of the loan repayment. Smaller loan repayment spans on the other hand, tend to impose a higher burden on the loan borrower. This is because the lower tenure means a higher EMIS, that often digs a hole in the borrower’s pocket and can even put the borrower in a large risk of loan default. In order to plan the loan tenure well, one can use Loan Against Property calculators available online.

Also Read:- Who Can be a Co-Applicant for my Loan Against Property?

However, before choosing a loan tenure, one must always consider checking and researching all rates about the LAP that needs to be paid during the long tenure. Further, charges like foreclosure and prepayment of the loan must always be checked in advance, for better planning of the loan tenure. Apart, it is not always the smaller EMIs that matter; indeed, it is also the loan responsibility that lasts over a time frame that matters. Thus, all these factors must be well checked upon.