Whenever you require a large amount of funds, the first thing you do is to sell off your personal assets to meet your money requirements. But this leads to loss of property ownership.
In order to retain the ownership of the property and also generate funds through it, you can mortgage and get a loan against property. It is a secured type of loan with no restrictions on using the loan amount.
You can comparatively get a higher loan amount due to lesser risk involved. A loan against property can be availed by anyone like a salaried person, businessperson, etc.
So as you can see, loan against property is quite beneficial to apply for, but if you want to get the maximum benefits out of it, you must follow the below-listed tips, which are as follows.
- Pay your EMI on time
There should be no compromise in this. Any delay in payment of EMI can cause a lot of problems, and you will be charged with penalties for late payment.
Late payment in EMI will also downgrade your credit score, which means it will be very hard for you to get any loan in the future. If such delays are continued for a longer period of time, the risk of the property getting seized also increases. In order to maintain a good credit score, make sure you pay your EMIs on time.
- Go for a shorter loan tenure
While you can opt for a longer loan term which will reduce the EMI that you will have to pay. But the fact is that you will end up spending a lot more money as interest towards your loan.
Hence you must opt for a shorter loan term. However, if you are cannot opt for a shorter loan tenure, in the beginning, you can opt for reducing it in the future. When you have access to more funds through a bonus or a hike in your salary, you can speak to the lender to reduce the tenure. This will reduce your burden, and you can repay the loan and release your property faster.
- Do not borrow beyond your capacity
Before you apply for a loan against your property, get your property valued. You may get between 50 to 90% of the property value as the loan amount. Use an EMI calculator so that you may know how much you will be repaying each month and plan accordingly.
If your EMI is more than half of your monthly budget than you will be putting yourself in great financial risk and you will have no spare funds left for other important financial investments. You may even default in your repayment, which will put your property at risk.
- Read the terms and condition thoroughly
Knowing what is written in the loan document is extremely important. It contains details like late repayment penalties, processing fees, administration fees, and a lot more.
Your lender must clarify any doubts with regards to the terms mentioned in the loan document before you sign it. Not being aware of all the terms and conditions can land you in trouble in the near future.
- Insure your loan amount
Loan amount granted under loan against property is usually on a higher scale. Even after evaluating all the risk and doing EMI calculations, you can never be sure about your future financial situation.
Your personal demands may drain up your funds, or due to health issue, you cannot hold a job. To safeguard yourself from such a situation, it is recommended that you insure the loan amount. Banks will offer insurance on a yearly premium, and it will keep your loan covered in case of any unforeseen circumstances.