Indian borrowers opt for external financing to meet a varied number of requirements. Nonetheless, they often commit mistakes while applying for this financial instrument. Lack of knowledge and awareness about the financial product chosen is the primary mistakes one should curb prior to initiating a loan application.
In the case of availing a loan against property, borrowers often make certain mistakes that can leave a negative impact on their future finances. As the loan against property market is forecasted to grow at a CAGR of over 14% by the fiscal year 2026 owing to increased demand, it is essential for potential borrowers to avoid the following mistakes before loan application.
Mistakes to avoid while applying for a LAP
Lenders consider a number of factors like a borrower’s creditworthiness before approving a particular loan amount. Therefore, it is necessary to meet several loan against property eligibility requirements before applying for it.
Nonetheless, applicants may fail to secure maximum benefits from a loan even after fulfilling the eligibility because of the following reasons –
- Not comparing interest rates
The interest rates vary depending on several factors like credit risk assessment, loan amount, repayment tenor and more. Different lenders offer loans at varying rates of interest. Therefore, it is vital to compare these lenders before settling for one. Individuals should opt for a financial institution that lends this secured loan against the lowest interest and the best terms.
In addition to this, one can calculate his/her monthly instalments prior to loan application by using a loan against property EMI calculator. The calculator allows a borrower to input different variable to fetch the EMI amount he/she needs to bear in the coming years.
- Failing to consider processing fees
It is crucial to factor in the processing charges for big-ticket loans such as loan against property. Before submitting the final application, one must consider the fees charged by different lenders, as this may increase the total cost of borrowing.
Remember, LAP on floating interest rates does not attract prepayment charges. However, those borrowing these loans at a fixed interest rate have to pay foreclosure or prepayment charges. Therefore, one should opt for a LAP on a floating interest rate to avoid hefty charges.
- Incorrect loan tenor
Even after checking eligibility and calculating EMIs, a borrower often fails to choose an appropriate loan tenor. It is important to note that selecting a longer tenor will reduce the EMI amount but increase the period over which one needs to make the payment. Therefore, a longer tenor can increase the interest burden.
Therefore, in such a scenario, one can choose a shorter tenor if he/she is confident about the repayment capacity.
Nonetheless, a borrower’s EMI outgo may be more under a current lender and can affect his/her repayment capacity. In that case, one can opt for a loan against a property balance transfer and settle for a different lender.
- Unable to process the loan disbursal time
Although the documents required for a loan against property are minimal, verifying these can take some time. Furthermore, lenders evaluate a property’s market value before disbursing the credits, which can be a time-consuming procedure.
However, some leading financial institutions offer an appreciably high loan amount at affordable interest rates and disburse a loan against property in a short span.
These HFCs also provide pre-approved offers for a seamless loan application process. These pre-approved offers are available on various financial products like home loans, loans against property, etc. Borrowers can check their pre-approved offer by entering their name and mobile number only.
- Not considering existing financial liabilities
In case of emergencies, borrowers require a substantial corpus that may be difficult to obtain if they have an ongoing EMI. Mitigating financial risks during such a scenario demands a borrower to ensure they do not have existing liabilities that might be skewing their debt-to-income ratio.
With these few factors into consideration, borrowers can proceed to make a loan against property application and boost their chances of approval.