Saturday, July 13News That Matters

Loan Against Property – Dos & Don’ts You Must Know

A loan against property or LAP is a low-cost means to make sure the funds are made available when required. This loan is secured in nature i.e., you require mortgaging your property to avail the loan. As you entrust your asset to the financial institution, you must practice caution with such kind of loan option.

Typically, loan against property is used for business reasons by professionals, self-employed, and entrepreneurs. Banks even offer​ a​ loan against property like Axis bank, SBI loan against property, HDFC bank, Citibank loan against property, etc. Also, NBFCs or non-banking financial companies even offer a loan against property with property’s backing.

Shop Around For The Loan Value And Better Loan Against Property Rate Of Interest – 

This is one of the most crucial parameters you must factor in when placing an application for a loan. Ensure to always speak with the representative from 3-2 distinct lenders, involving NBFCs and banks. Availing a loan is the same as buying any other loan product. You are totally free to haggle around as much as you want. Note that even if there’s a 0.5 per cent reduction in the loan against property interest rate, you can save a lot of money over the long term. Negotiate with the lenders as much as possible to avail the best loan against a property interest rate deal and a good property valuation.

Select A Reputable Bank Lender – 

It is important for you to choose a reputable financial institution to obtain a loan against property. Doing so would endow you with the assurance that they will take good care of your property documents which you are giving up as security or collateral. Always ensure to check the required loan against property documents before placing an online application. If there’s a remote chance that your documents will be misused or lost, ensure to walk away from this transaction instantly. No matter how rushed you are concerning the loan against property deal, never risk the most valuable asset to opt for a loan against a property deal with an untrustworthy financial institution.

Also Check: Citibank Loan Against Property

Loan Against Property - Get a Property Loan upto ₹5 Crores

Maintain A Good Credit Score – 

Most of you as an applicant have the tendency to believe that a high credit score is a must to obtain a loan against a property deal and that once the loan deal is approved, you can allow your credit score to fall. Note that, this is thoroughly an incorrect approach to looking at a credit score. Your score is connected with all the credit options that you avail and is looking to take up. If your score goes down, then the lender who has provided you with a good deal on a loan including a loan against property has the choice of increasing the offered interest rate because of your fallen credibility. So, ensure to keep a close eye on your credit score and never allow it to fall. You can maintain a good credit score by following healthy credit behaviour like repaying your existing loan dues and credit card bills in full and by the due date, maintaining a healthy balance between secured and unsecured credit options, keeping a lower credit utilisation ratio, never applying for multiple credit deals in a short time period, always considering to review your credit score and profile by fetching your credit report from the respective credit bureaus namely – CIBIL, Experian, CRIF Highmark and Equifax. It is a must to fetch your credit report once every 3 months so that you are able to review your credit standing and detect in case there are any errors. If you find an error in your credit report, ensure to report the same as fast as possible to the concerned lender or creditor and respective credit bureau. Taking this approach will allow you to increase your credit score instantly. Doing so would further allow you to become eligible for better loan deals and credit card offers in the future. A higher credit score of 750 and above also would allow you to get a loan against property processed in the minimal time possible and at a lower loan against a property interest rate.

Check The Loan’s Mitc (Most Important Terms And Conditions) – 

The MITC or most important terms and condition is an important document that all lenders offer meticulously when they provide you with the loan agreement letter and other important documents to sign and read. The MITC documents mention all the standard loan against the property repayment process, pre-closure charges, loan foreclosure charges, property repossession rules and other important conditions. If you carefully go through the MITC document of the loan against the property’s lender, then you will not require to approach a customer care service to get an answer for most of your common questions.

Ensure To Save Some Loan Proceeds In The Case Of An Exigency – 

As with any other credit option, it is recommended to keep aside a substantial amount of money from your loan proceeds as a few months’ EMI to meet your payments in the case of financial exigency. The basic norm is to keep 6 months of loan EMI with yourself and at least keep 2 months of the loan EMI along with you at all times in the form of an exigency fund. Doing so would protect you in the occasion of delay in the salary, job losses or any other issue that impacts your income. Ensure to keep note of the fact that this fund is for financial exigency. Only if your monthly income stops all of a sudden would you use it to cover your loan EMIs till you get a good job again.

Do Not Endow Anyone With Your Original Know-Your-Customer (Kyc) Documents – 

Your identity is an important aspect you must protect. Unfortunately, there are many who tend to fall prey to identity theft and are held accountable for severe actions that they did not conduct. Thus, ensure to keep your original KYC documents with you and never hand them over to anyone.