Loan against property is an excellent and convenient way to raise money. As the name suggests, loans against property are Sanctioned by financial institutions by accepting property as collateral. The borrower needs to pledge his or her property as a security against the loan amount.
In case the borrower fails to repay the loan within the tenure, the property can be sold or auctioned by the lender to recover the loan amount sanctioned to the borrower.
Also know these pointers before availing a LAP:
⦁ 1.Decide on the basis of what you really need. Also see if the cost fits into your estimated budget.
⦁ 2.Compare the quotations given and interest rates from 3-4 banks, select the one which offers maximum benefit and serves your purpose.
⦁ 3.Also determine the tenure of the loan. The EMI may come less for longer tenure, but the total interest outgo will be higher.
⦁ 4.Know all about processing fees and time. Some banks may waive the processing fee for processing loan but they build this cost on their interest rates.
⦁ 5.Consider pre-payment options. All banks charges 2% – 3% of the loan in case you decide to pre-pay the outstanding amount.
⦁ 6.Default in payments results in penalties. It can also adversely affect your credit history and profile. So make sure to make your payments on time.
⦁ 7.Make sure that all deals and offers agreed upon are supported by relevant papers. So make sure you always ask for a letter in a banks letter-head mentioning the likes of, exact rate of interests, processing fees, pre-payment charges along with interest-schedule.
⦁ 8.Also before signing the documents, make sure you recheck all terms and conditions.
⦁ 9.Do not at any circumstance give any false information. This may amount to fraud and could land you in trouble.
⦁ 10.Do not sign any blank documents. Even if it takes you a few hours to fill-up the form, please do so. Do not leave anything for the executive to fill-up.
⦁ 11.Finally, once you have received a loan do your best to pay it back as quickly as possible. Banks make their money off the interest they charge and the sooner you pay back a loan the less money you will have to pay in interest.