Are you looking for some emergency funds? Are you planning to set up a business and are searching for some funds for investment purposes? Probably, a loan against property may help you overcome such situations. A loan against property comes under the category of secured loans, wherein the property of the loan seeker is mortgaged in exchange for a loan until and unless the applicant pays back the loan amount completely. The property acts like a collateral and should be owned by the person who is applying for the loan. Such secured loans are easy to get because of the security factor associated with the loan. But, most loan seekers end up making mistakes while seeking a loan against property. So here we mention a few mistakes that you should avoid while taking a loan against property:
Not taking the loan agreement seriously
This is one of the biggest mistakes you can make while taking a loan against property. While seeking such a loan, it is imperative that you read every line mentioned in the agreement and understand the same so that you do not risk yourself to unwanted surprises that may pop all of a sudden. Read the terms and conditions carefully, and only then move ahead to sign the deal. Ranging from the hidden fees to the different clauses and terms of payment, check out everything minutely before you seal the deal.
Not preparing well to meet loan prerequisite
Just being the owner of a property does not make you eligible to apply for a loan. Many times, loan applications are rejected due to being underprepared while applying for a loan. Hence, preparedness is the key to seeking such a loan against property. May it be the essential documents, understanding the eligibility difference between registered mortgage and equitable mortgage, chalking out a repayment plan or maintaining a good credit history, it is crucial to prep up before taking a loan against property.
Failure to opt for the right loan tenure
Loan tenure also plays a vital role in taking a loan against property as it decides the monthly instalment that you have to pay. Thus, do not opt for a loan tenure with your eyes blindfolded and go for a calculated tenure term so that you have a reasonable amount that will go as EMIs that you can afford to pay without burning a hole in your pocket.
The interest amount and loan tenure is directly proportional to each other. The longer the tenure, the greater the interest amount and the lesser the monthly payments. On the contrary, shorter loan periods mean a lower interest rate and bigger monthly instalments. But, when you opt for shorter loan periods, make sure that you take all your current liabilities into consideration. This will help you determine whether you will be able to pay back all the EMIs on time without missing the due dates and without facing a financial crisis.
Not including the processing fees
The processing fees charged by different lenders may vary. In most cases, usually, 1 to 2% of the overall loan amount is charged as processing fees for a loan against property. Also, because such loans are ticket loans, the processing charges are prone to be significant. Thus, ensure that you add the processing fees to the total amount to find out the exact sum.
Not having an adequate repayment plan
Having a clear repayment plan is necessary, but usually, loan seekers tend to avoid it. Though the lender company may not ask you about your repayment plans, you need to have it in your mind to ensure that you can make hassle-free payments without spoiling your monthly budget. It is because once the instalment is finalised as per the tenure, it cannot be lowered if, at any point in time, you discover that you will not be able to cater the EMI. Thus, it is imperative on the applicant’s part to have a clear blueprint about how they are going to make payments because missing the EMIs results in heavy fines and penalties.
Decide beforehand how much you can afford to pay and accordingly finalise the loan tenure and EMI. Also, if you do not find yourself to be in a position where you can pay back huge sums, opt for a small loan rather than taking a huge loan against property.
Misinterpreting the loan disbursal time
A loan against property is easy to get, but it usually takes time for the disbursement process and is not given instantly. The lender company has to first verify the creditworthiness of the loan applicant and is also required to evaluate the property placed as collateral. Only when all such things are verified the loan amount is disbursed, which can prove to be time-consuming. Thus, if you are in immediate need of funds, you might have to consider other options or apply for a loan against property well in advance so that the loan gets approved by the time you need money.
The loan against property landscape has evolved over the years and has made it pretty easy and quick for loan applicants to seek such a loan. With that said, most of the time, loan seekers are often seen to be in a hush-hush to get their loan approved. And that is where there arises a scope for mistakes to occur. But, if you are someone who does not want to fall prey to any such event that can cause loan rejection or may hurt you in the long term, make sure that you keep the points mentioned in this guide in your mind to stay at bay from committing any mistakes while taking a loan against property.