If you are looking for additional funds for your personal use or even for business, getting a Loan Against Property is one of the best options available to you. Providing collateral like property (residential or commercial) ensures that you can get a loan that you need based on the value of the property. However, this is also quite the risk if you do not manage your loan account well.
Before you Get a Loan Against Property, here are a few things that you need to keep in mind to ensure that you are able to keep your mortgaged property secure as well.
A Loan Against Property is a type of secured loan where property owners who are looking for a larger loan amount can use their property as security. There are no restrictions on the usage of loan amount. You can get higher loan amounts with this type of loan because the risk to the lender is much lesser. In addition to this, the interest rate is also much lower on a DHFL Loan Against Property or any other property loan.
The loans are available based on the following factors:
These loans are available to all – salaried, self-employed businesspersons, and self-employed professionals. The loan is based on the income of the individual irrespective of the professional background, making it easier for just about anyone to avail a Loan Against Property for any financial requirements.
The low interest rate and the large loan amount can be quite tempting for most individuals to avail these loans. However, you need to remember that your property is at risk if you do not stick to your repayments. Keeping the following rules in mind will help you ensure that the loan account can be managed well:
Before you get a loan against your property, have your property valued. You will probably get between 50-90% of the value of the property as loan. Then, calculate the equated monthly instalment (EMI) based on the rate of interest that you are being offered. You can use MyMoneyMantra’s online EMI calculator to help you understand how much you will be repaying each month. The EMI towards your Loan Against Property should not be more than 50% of your monthly income. If your EMI is larger than this, you will be doing away with most of your budget and may not be left with any funds for other important financial investments such as a feasible retirement, funds for children’s education, and more. You may even have lapses in your repayment which puts your property at risk each time the amount piles up.
Loans Against Property offer several attractive features. One such feature is a flexible term for repayment of the loan. This can range from 5 years to 20 years. Most individuals opt for a longer loan term because it reduces the EMI that you pay. As feasible as this may seem in the beginning, the fact is that you will end up shelling out a lot more money as interest towards your loan. It is advisable to opt for a shorter loan term. However, if you are unable to go for a shorter loan tenure in the beginning, you always have the option of reducing it in the future. When you have access to additional funds such as a hike in your salary, you can speak to the lender to reduce the tenure. This reduces your burden and also ensures that you can repay the loan faster and release your property.
It is very important for you to repay your EMI regularly. Any default in your repayment can become quite the issue. You will be charged penalties for late payment which means that you will end up shelling out more money. A lapse in payment also reflects on your credit score which means that you will find it extremely hard to get any loan in the future. If irregularities in repayment carry on for longer periods of time, the risk of having the property seized also exists. To make sure that you maintain a good credit score, make sure that EMIs are repaid on time.
As mentioned above, you can get large loan amounts easily with Loan Against Property. Even if you have weighed all the risks and have also evaluated your own repayment capacity when purchasing the loan, you can never be 100% sure of your financial situation in the future. There may be a demanding emergency that drains you of your funds, health issues that prevent you from holding on to your job or just about anything that will make repayments impossible. To reduce any burden on your family in the future, having a large loan amount insured is highly recommended. Banks will offer insurance with most term loans. The yearly premium is very reasonable and will keep your loan covered in case of any unforeseen circumstances.
Reading your loan documents thoroughly is extremely important. While it may seem too lengthy, everything that is mentioned in the loan document is very important for the borrower to know. This includes details like foreclosure charges, late repayment penalties, pre-payment charges, processing fees, administration fees, and a lot more. If you have any queries with respect to the terms mentioned in the loan document, make sure that you clarify them with your lender before you actually sign the document. In case of any dispute in the future, not reading all the terms and conditions can land you in trouble.
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