Rules to Follow If You Are Opting for Loan Against Property - Make Money Online

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Rules to Follow If You Are Opting for Loan Against Property

A loan against property (LAP) is like other loans where your property is used as the collateral. It is an easy way to meet huge fund requirements. The quick approval procedure, simple documentation, and repayment flexibility are increasing the demand for such loans.

Benefits of LAP
  1. Larger loan amount
  2. Longer repayment tenure thereby reducing the Equated Monthly Installments (EMIs)
  3. Compared to unsecured facilities like personal loan, loan against property interest rates are lower
  4. Funds may be used for personal or business requirements
Although there are several benefits of availing a LAP, you need to follow the five below mentioned rules.
  1. Ensure timely payments
It is crucial you follow a disciplined approach to make timely repayments. Delayed or missed EMIs not only incur penalties but also negatively affect your credit score.
  1. Choose shorter tenure
Lenders offer up toyears as the repayment tenure for a loan against property. It may be tempting to opt for longer tenure to reduce your EMI. However, the longer the tenure the higher is the interest payout. It is recommended you choose shorter tenure to save interest in the long-term.
  1. Review the fine print
It is important you read the terms and conditions of the loan agreement before signing the dotted line. In addition to the interest, mortgage loan includes other expensessuch as legal and processing fees as well as administrative costs. Moreover, there may be prepayment penalties. Therefore, it is important you review the fine print and understand all these charges to prevent surprises in the future.
  1. Avail of insurance coverage
If you borrow a large amount as a loan on a property, it is recommended you avail of insurance coverage too. This ensures your family does not face any difficulties to repay the amount in case of an unfortunate event.
  1. Close high-cost loans
If you have outstanding credit card bills or personal loans, you may use a loan for property to consolidate these expensive obligations. This will help you save the finance cost.

Non-banking financial companies (NBFCs) and banks offer LAP against industrial, residential, and commercial properties. You may avail of up to of the property value as the loan amount. The loan amount ranges between INR 5 lakh and INR 10 crore.

Eligibility criteria
  1. Minimum entry age: 23 years
  2. Maximum age at maturity: 70 years
  3. Self-employed: at least two years in the business with a positive net worth
  4. Salaried: minimum years experience
  5. Documents: residential and office address, bank statement, name and birth date, property papers, and latest income tax returns (ITRs)
When you avail of a mortgage loan, you use your property as collateral. It is important you consider all aspects of the loan before making your decision. Your property is at risk in case of non-payment and you must avail one only if you are confident of making timely repayments.
Rules to Follow If You Are Opting for Loan Against Property Rules to Follow If You Are Opting for Loan Against Property Reviewed by Lokesh kumar on 5:11 AM Rating: 5