Availing a loan against residential property is one of the most common forms ofgetting funds during an emergency when you are under financial stress. You can get loan against residential property owned by you or a rented residential property. In case of a jointly owned residential property, all the co-owners beside you have to be co-applicants of the loan. This is a secured loan and you can keep a fully constructed, residential property as collateral or mortgage. However, there are certain mistakes that you should avoid while applying for this category of loan. Read on to know more about them.
The mistakes that you can avoid are:
Not comparing interest rates by lenders
Before selecting a lender, you should do some research either online or offline to go through the interest rate on loan against property offered by different lenders. It is an important factor as a high interest rate can increase your EMI (equated monthly instalments). Go through the websites of lenders or quotes comparison websites to find out the least interest rate that you can get. This would help you to save more on your EMIs as that would be an additional burden beside your regular expenses that you have to undertake.
Applying for a higher amount of loan than required
Assess your fund requirement carefully when you apply for a loan. Do not apply for a higher amount of loan than is required as you have to pay interest on the extra amount also. If you require more funds later, you can apply for top-up loans. Also, if you apply for a very high amount of loan, it can get rejected if you do not meet the eligibility criteria.
Ignoring the loan tenure or repayment period
A loan tenure is important as you have to pay EMIs for the entire period every month, once your loan gets disbursed. A longer loan tenure means you have to pay the EMIs irrespective of your financial situation and you never know how long you may have a stable income. The lenders may try to urge you to go for a longer loan tenure as their interest income would increase. If you can manage to close the loan fast, it would be an advantage for you. A short loan tenure would lead to a lower amount of total interest on the loan against residential property.
Not going through the loan agreement
Go through the terms and conditions on the loan agreement as they are important and can affect your repayment process. There may be hidden charges, extra costs, policies related to repayment, penalties due to defaulting, etc. Ignoring these facts can lead to payment of extra amounts to the lender while you are paying your EMIs. In case of doubts, do not anticipate but get in touch with the lender to know about the details.
Not considering the time required for loan disbursal
The lender may take time to disburse the loan and you should keep this in mind while applying for a loan. Since it is a loan against property, assessment of its valuation, processing, scrutinising your eligibility and documents, etc. Would take time. If you require funds in emergency, keep sufficient time at hand and apply in advance to avoid the time lag. You can communicate with the lender regarding the approximate time required for disbursal. So that you do not have problems related to the processing time.
Ignoring the eligibility requirements and credit score
Eligibility requirements like your income, repayment ability, value of your property, credit score, etc. Are important factors that the lenders consider while processing your loan application. Go through the eligibility criteria specified by the lender to see whether you fulfil them. Based on your eligibility, the lender would decide either to take your loan application forward or reject the same. Try to maintain a good credit score by paying your credit card bills and any existing loan EMI on time. If you have a fully constructed residential property. You can apply for a significant amount of loan against residential property to come out of the financial stress. While going through the process, you need to take care of certain things. Otherwise these mistakes can land you in trouble. Your loan application can get rejected or you could end up paying more EMI that you would have saved.