For borrowers who need funds on an urgent basis and prefer to get the loan on simple and uncomplicated eligibility terms, a loan against property can be a good option. This is a secured loan that you can get by pledging your property as collateral in order to get the funds required. The reason why this loan is a preferred option among many borrowers is that it includes low interest rates and long repayment tenures.
Now, if you want to apply for a loan against property, it is important to know certain things about the loan before doing so. Being unaware can cause problems in the future when it is time to repay the loan, something that should definitely be avoided.
Therefore, here is a list of dos and don’ts while applying for a loan against property.
- Focus on the benefits of the loan
Before applying for the loan, you need to be sure that the loan plan is offering a good deal. For instance, the right loan amount, a suitable repayment tenure, and even an affordable loan against property interest rate. Consider numerous options to understand which loan plan has the best terms.
- Try and opt for a short repayment tenure
While most borrowers prefer to opt for the maximum tenure that they can possibly get, it is advisable to go for a short one. This is because even though the monthly instalments would be higher in a short tenure, you still manage to save on the interest by cutting down the number of EMIs.
- Always consider the risks involved
While taking a loan against property, you need to consider the fact that your property that is pledged as collateral is at risk. Of course, if your finances are in order, there is nothing to worry about, however, it is always good to be prepared for worst-case scenarios.
- Miss out on EMI payments
Defaulting on EMI payments should always be avoided as this would affect your credit score and result in late payment fees. Make sure to always clear your EMIs on time.
- Never apply for a loan amount that you cannot repay
Calculate your debt-to-income ratio and only apply for a loan amount that you are comfortable to repay. Going for an out-of-budget loan amount is only going to cause financial problems.
- Ignore the tax benefits of this loan
If the loan against property is being used to buy a house, you should be aware of tax benefits that can be claimed. You can get tax benefits on the interest payments of the loan up to Rs 2 lakh under Section 24.
Now that you are aware of the dos and don’ts, go ahead and start inquiring about the loan. Also, make sure to check with the lender regarding the loan against property documents that they require. This will ensure that the documentation process does not take time.