When you mortgage your property to avail a loan, it is called a loan against property. With a loan against property, you can fund your varied needs, be it business needs, your children’s higher education or wedding, medical emergency, etc., without exhausting your savings. The best thing is, you can mortgage any property, be it industrial, commercial or residential to avail a loan.

Loan Against Property

While availing a loan against property, ensure to keep the following things in mind:

  • Research about the lender

Before you avail a loan against property, ensure to do adequate research to determine the loan offer that suits you. You must always check various lenders before choosing one. You can use an online aggregator or a loan against property EMI calculator to do so. Moreover, you should not consider lenders based on interest rates alone. You must also check other factors like processing fee, late payment fee, terms and conditions, hidden terms and conditions, etc.

  • Tenure

The tenure of a loan against property is longer than a personal loan, which helps you fulfil your financial goals. However, you must choose your tenure carefully. If you opt for a very short tenure, you could face a cash crunch in your daily expenses. On the other hand, if you avail a tenure that is too long, the EMIs will be small, but it would stretch for a longer period, increasing your interest outgo and cost of borrowings.

  • Default

If you fail to pay the loan EMI, there are high chances that you would never get your property back. The lender reserves the right to auction off your property in case of default to recover the dues. Therefore, avoid over-leveraging and ensure to check your affordability when you avail a loan against property. Assess your income, expenses and consider your financial viability before availing a loan.

  • Fine prints

A loan against property has various aspects and clauses. Experts opine that you must be aware of those before you avail the loan. Therefore, before signing below the dotted line, ensure to read the fine prints carefully. Check the clause of fees, defaults, interest etc., and clarify with the lender if you have any doubts.

  • Ownership of the property

When you avail a loan against property, you must assure that the property in question is free from any disputes and has a clear title. If there is an issue with the ownership, the lender can reject the application without much ado. If the property has multiple owners, all of them must agree to avail a loan against the property. You might have to furnish a consent letter from all such owners to get your loan approved.

Your loan would depend on the valuation of your property and its loan-to-value ratio (LTV). Usually, lenders send a team for the legal and technical verification for the property valuation. However, you can also get an idea about the valuation of the property by getting it evaluated yourself. Once you ensure to consider these factors before availing a loan against a property, it won’t be difficult to get a loan against property and fulfil your financial needs.