5 Mistakes to Avoid While Applying for a Loan Against Property

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Cash flow challenges are inevitable in everyone’s life. You might need money for personal or business expenditure. Although unsecured business loans are available in the market, they do not allow you to borrow more money than a pre-set limit during such times. What will then be the best option to meet financial needs? The answer is “loan against property”. In times of limited salary and inflation, you may suddenly need money. On the other hand, personal loans also have a limit that you cannot take a loan of more than a certain amount. Maybe your need is so big that you are planning to sell your property. However, you can consider a loan against property (LAP) for taking a large amount of debt. 

If you own assets, you can easily avail an online property loan loan that almost equates to their value. But financial emergencies may drag you to get the loan procedures done faster. You might make several mistakes at such times. Here is a list of such errors that will help you make correct decisions at the time of availing such collateral loans:

Proceeding For A Loan Application Before Checking Your Credit Report

Even if you choose to skip this step of reviewing your credit history, the lender will surely do it. Your credit history states your credit score that represents your ability of borrowing and repaying the loan, based on your credit history. Your credit history will also let the lender know about your current debts, loan and repayment history, assets that you own, the loan applications that you made in the last five years, etc.

If the lender finds you ineligible for the loan after checking your credit history, they might reject your application, and this may further affect your credit history. So, always review your credit score and history and see if they make you eligible for availing a loan against property.

Mistakes to Avoid While Applying for a Property Loan:

  • Applying for a loan without comparing the options available in the market-
    There are many lenders in the market, and they offer different interest rates according to your credit score and repayment tenure. Don’t rush when choosing the lender. Calculate the EMI and interest rates through their lap EMI calculators (available on their website). Choose the lender that offers you the least interest rates with best offers for repayment. Again, do not proceed before going through their terms and conditions as there might be hidden charges behind the lucrative offers.
  • Making too many loan applications-
    Don’t ever think of making too many loan applications in a hurry. The lenders can know about all your loan applications, and this may have an adverse impact on your credit reputation. They may think that you have applied for an availing loan from them as the rest have rejected your loan. They may even interpret that you might not have a good reputation as a borrower in the market. There are high chances of rejection in such cases.
  • Applying for a loan against property without planning the repayment-
    Once you apply for the collateral loan and you have a good credit history, the lender will surely disburse the loan amount. But what if the loan amount you have applied for is exceeding your repayment capacity? You will end up losing your asset along with an adverse impact on your credit history. You will further land in difficulties while getting loans in the future when you need them badly. Therefore, think before you choose the loan amount.
  • Lying about your income and expenses-
    Always remember that lenders are smart enough to find a red flag in your application. Even though you lie about your income and expenses, when in doubt, they will surely ask for proofs like bank statements, IT returns, etc. And once they find that you are lying, they can file a case against you for fraud. So, always be honest to your lender. If you are honest, they may suggest some way out to get your additional financial needs fulfilled.

Conclusion

Thus, never commit these mistakes and most importantly, do not forget to know about your EMI by using lap EMI calculators to plan the repayment properly before applying for a loan. The amount of this loan can be used anywhere, just like a personal loan. It should not be used in any illegal place. It can be used for higher education, business expansion and travel abroad etc. Be aware while choosing the lender for availing the loan against property and also compare the interest rate offered.