Rules To Follow While Taking A Loan Against Property

The Covid-19 pandemic and the subsequent nationwide lockdown have pushed many to the brink of collapse. While business are struggling with severe shortage of orders and working capital, people are struggling to face the consequences of job losses and shortened income opportunities. In a bid to improve the liquidity situation and survive these difficult times, it maybe wiser to take up a loan against property (LAP) instead of selling your asset.  

If you do decide to take up a loan against property, there are some factors that need to be considered. Since your prized assets are at risk, it is best to think it through and leave no room for errors.

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Research Your Options
If you decide to take on a LAP, donot just take up any loan that comes your way. Do your due diligence properly and compare different lenders and interest rates. A small difference in interest rate may not seem like much, but when you make repayments over a long period, this small difference can make quite a noticeable change in your EMI and loan tenure. Evaluate your eligibility and keep documents ready along with your credit score to know your likelihood of success.

 

Keep Buffer Time
A common mistake that people make while opting for a LAP is not factoring the loan disbursal time. The lenders evaluate the property before sanctioning the loan, which takes time. You should keep buffer time in terms of your requirements for funds since the loan disbursal can be a lengthy process.

Be Ready With Paperwork
In order for things to go smoothly, it is important that your pre-requisites to applying for the loan are complete. Keep your accounts up-to-date and other papers ready along with the details of your credit score to ensure loan application takes a minimum time.

Evaluate Repayment Terms Carefully
It is important to evaluate repayment terms carefully before making the choice of LAP. Choose shorter tenure of the loan, and if possible, to cut down on interest costs. Carefully forecast your cash flows to be able to make all EMI payments on time and avoid troubles with repayments. Maintain your high credit score by never missing an EMI. After all, you may require loans at a later stage in life. Having a good credit score helps in increasing the chances of a loan application being approved.

Carefully Read The Loan Document
There are many terms and conditions in the loan document that cover charging of interest, any penalties on missing EMIs or prepayments, loan tenure, etc. People make a mistake of ignoring the fine print of the lengthy document. Avoid making this mistake and know the loan repayment and other conditions that are listed in the loan agreement. It helps you stay alert and cautious, and prevent any unnecessary expenses in loan repayments.

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Concluding Thoughts: Lap – A Good Option To Get Funds
A loan against property is a good way of obtaining funds in crunch situations while cashing in the equity hidden away in your property. The interest is charged at a lower rate since it is secured. And lenders feel comfortable because they can auction the property off to get their dues back. Just avoid the mistakes discussed above and obtain much-needed finance easily and at a low cost.

Looking to know more about LAP loans, here are some common FAQs you should read up.