Avoid These 5 Critical Mistakes When Pledging Property for a Loan, or Face Major Trouble!
When there is a sudden economic crisis in life - it is a medical emergency of a loved one, the child's wedding expenses or the need to expand business - Loan Against Property - Lap comes as a better option. It is a secured loan in which a person can borrow a huge amount by mortgaging his residential or commercial property (such as home, flat, shop, office etc.) with a bank or financial institution.
Although this is a convenient remedy, if you ignore some important things before taking a loan, then this solution can also cause trouble. Often people make some such common but serious mistakes due to havete or incomplete information, which may lead to them later. Come, learn 5 such big mistakes from which you should stay away from-
Take A Loan Without Comparing Interest Rates
Many times people talk to only one bank and immediately say yes to the loan. They do not see what offers are going on in other banks and NBFCs (non-banking finance companies). From this they take loans at higher interest rates which cause them financially damage in the long term.
Advice: Compare interest rate, processing fees and EMI options from at least 3-4 banks or NBFC. Use online loan comparison tools.
Not selecting the loan period correctly
While taking a loan, banks usually offer long -term options to make your EMI less. But in this affair you pay more in total interest.
Advice: If your monthly income is stable and sufficient, choose short duration of loan. This will have to reduce the total interest and the debt will end quickly.
Ignoring the loan agreement
Many people do not read the conditions carefully before signing the document. Many times it contains clauses that can later implicate you in pre-payment charge or other fines.
Advice: Read the line-by-line to the agreement, especially foreclosure penalty, conditions of change in interest and rules in default.
Ignorance
The loan in lieu of property does not usually do disbursement as the bank takes time in valuation of your property, checking of documents, etc.
Advice: Before taking a loan in an emergency, make it clear from the bank how much time will take the whole process. Plan your funding requirement accordingly.
Credit score light
Although LAP is a secured loan, banks check your credit history and CIBIL score. A poor credit score can cause loan rejections or high interest rates.
Advice: Be sure to check the CIBIL score before the loan application. A score above 750 is considered ideal and this can give you a loan on better terms.
Take big financial decisions thoughtfully
Loans are a convenient and relatively cheap financial option in lieu of property, but caution is necessary. Any decision taken in the absence of haste or information can harm your financial health. Therefore, do complete research before taking a loan, read the documents carefully, understand the bank conditions and then take a decision.