Points to Consider Before Applying for a Loan Against Property
It is not unusual to face challenges with cash flow. Whether you need money for your personal expenses or to operate a business, loans against property are great solutions to your cash flow problems. These loans provide a much higher amount in comparison with unsecured loans like personal loans.
Loans against property, as the term suggests, are secured loans wherein you will have to pledge a property, be it residential or commercial, in order to avail funds for your emergency needs. Examples of properties that can be used to secure a loan against property include apartments, flats, residential spaces, shops or even offices. The property will be treated as a collateral for the loan, and it must be owned by the applicant.
Loans against property are becoming increasingly popular and may be used to fund your business, or even for personal reasons like marriage or in times of medical emergencies. The value of the property you pledge as collateral is one of the most crucial factors considered by lenders, along with your credit history and your income.
In case you have made up your mind to take a loan against property, there are a few important points you must remember before you submit your application. They are as follows:
1. Compare interest rates
The first and foremost point to consider is the interest rates applicable to a loan against property. Make sure you compare different lenders and check the interest rates they are offering before drafting your application. Comparing interest rates will help you find the solution with the most affordable EMIs, thereby making it easier for you to repay the loan amount.
2. Tenure
When you decide to take a loan against property, it is crucial to determine the tenure of the loan. Most banks and financial institutions tend to offer longer tenures, but it is advised that you choose a relatively short tenure based on your ability to repay the loan. The interest rates applicable to loans with shorter tenures is lower than the interest rates applicable to higher tenures, which means that your interest outgo will be lower with a shorter tenure.
3. Read the fine print carefully
Most people tend to take loans against property by just discussing it with a representative of the bank. It is advised that you read through the fine print carefully as doing so will help you get a clear understanding of the terms and conditions of the loan.
Read More: Tips to Reduce your Home loan Stress
4. Disbursal time
Loans against property tend to take more time to process when compared to unsecured loans because the lenders take time to verify your documents and value your property. When you apply for a loan against property, make sure you ask your lender how much time will be taken for the sanction and disbursal of your loan so that there are no delays in meeting your financial requirements.
5. Check your credit score
Despite the fact that loans against property are secured loans, lenders check your credit history to confirm if you are a trustworthy customer. The higher your credit score, the easier it will be for you to not only avail a loan, but to also negotiate a favourable interest rate. A lower credit score, on the other hand, may make it difficult for you to avail a loan against property.
Keeping these simple points in mind before applying for a loan against property can make it relatively easy for you to find the solution that best fits your financial needs.
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