Most of us face financial challenges from time to time – some need cash for fulfilling personal desires while others require cash to take their businesses to the next level. To settle these unending struggles for cash, you can opt for a loan against property as it gives you more borrowed capital compared to unsecured loans like personal loans.
How does LAP Work?
LAP or a loan against property is a type of secure loan which requires you to pledge a property like a house, land, shop, etc. as security against the borrowed money. The pledged property acts as a guarantee against the loan. The pledged property can be residential or commercial, that has a present market value.
The loan against property can be used for various purposes like for expanding your business, for medical emergencies or as funds for marriage in the family. The rate of interest on LPA depends on the type of property, repayment period, amount of the loan, etc. Thus, the rate of interest can vary in different banks, but there are few things they consider while approving a loan, which includes –
- Your loan for Eligibility for the loan
- Monthly Income
- Credit History
- Present Market Value Of the Property
Common Mistake To Avoid While Taking A Loan Against Property
If you are planning to apply for a loan against property, then you should avoid a few common mistakes which borrower tend to do :
Choosing LAP Without Comparing Interest Rates:
While selecting a bank for applying LAP, it is crucial to do proper research. It is recommended to compare the interest rate of different lenders, then choose the most affordable rates, which could lead to lower EMIs.
Not Putting Effort On Comparing Tenures:
Another mistake most people tend to make is, not paying much attention toward the tenures. The repayment period is a crucial factor of loan against property. It is not recommended to opt for a long tenure, as it is better to repay the loans as soon as possible. The shorter repayment period means a low rate of interest.
Not Arranging The Required Documents Beforehand:
The approval of a loan is an easy and simple process. But the main difficulty is to arrange all the required documents, but most people ignore the paperwork and often suffer due to lack of preparation.
Don’t Put many efforts In Reading The Loan Agreements:
Most people try to avoid reading lengthy agreements which could be harmful. It is recommended to double-check all the terms and conditions before signing the agreement for LAP.
Not Taking Enough Processing Time:
Generally, loan against property requires time to process as the bank has to verify the property’s value and credibility before approving the loan. It is recommended to check beforehand how much time the bank will require to approve the loan so that you can manage the expenditure accordingly.
Not Paying Much Attention Toward Credit Score:
Most people think that as LAP is a secured loan, it doesn’t require a proper credit score. But it is a misconception which could lead to disapproval of the loan. So it is recommended to maintain a high credit score which could increase the chances of approval loan.
The loan against property is the best way to obtain funds to undertake high-end expenditure