A loan against property (LAP) is a secured loan given against residential or commercial property such as a house, shop, etc. This loan can be used for funding business expansion or for personal purposes. A loan against property is a great way to unlock the equity in your property. Avoid these 5 critical mistakes for a greater chance of getting your application approved:
All of us could face cash flow challenges at some point in life – some may need cash for personal use while others could need funds for their business. In such times, it could be worthwhile to opt for a loan against property as it can give you higher borrowing capacity compared to any unsecured loans such as personal loans. Have you ever wondered what a is loan against property, how it works, and what to avoid while opting for one? Read on to find out…
What is Loan against Property?
A Loan against Property (LAP) is a secured loan that is given against a residential or commercial property such as a house, flat/apartment, office, or a shop. The property acts as collateral and has to be self-owned with a clear and marketable title. This type of loan can be used for funding business expansion or for personal purposes such as marriage in the family, medical emergencies, etc. Some of the important factors that lenders take into consideration to determine your loan eligibility are your income, credit history, and the present value of the property.
Mistakes to avoid while taking Loan against Property
If you have decided to opt for a loan against property, you should avoid these seven critical mistakes for a greater chance of getting your application approved:
1. NOT COMPARING INTEREST RATES: When choosing a lender for LAP, it is important to do your due diligence. You should compare interest rates between lenders and choose one that offers affordable rates to lower your Equated Monthly Instalments (EMIs).
2. NOT PAYING ATTENTION TO THE TENURE: The tenure of a LAP is important; don’t opt for a longer tenure merely because you are offered one. If you can afford to pay back the loan sooner, do so. A shorter tenure attracts a lower interest outgo amount.
3. NEGLECTING THE LOAN AGREEMENT: A lot of people do not read the terms and conditions under which they are offered the LAP.
4. NOT FACTORING IN DISBURSAL TIME: loan against property typically takes time to be processed because lenders need time to value your property before the loan can be sanctioned. It’s advisable to enquire about the expected time the lender will take to sanction and disburse your loan so that you can match your requirement for funds with the lender’s disbursal schedule.
5. IGNORING YOUR CREDIT SCORE: Even though LAP is a secured loan, your credit score is taken into consideration while processing your loan application. A high credit score can get you a loan on favorable terms and also increase the chance of the application being approved.
A loan against property is a great way of obtaining funds when you are facing a cash crunch. It unlocks the equity hidden in your property. You should utilize this avenue wisely and ensure that your loan application merits receiving approval.