If you require a large amount of money to cater to a crucial financial requirement, opting for a loan against property can be a more viable option than an unsecured loan. You may need to buy a new home, fund a wedding, or make an investment. A LAP loan can cater to all your big-ticket financial needs.
However, you must meet the loan against property eligibility criteria to get a deal offering the lowest interest rates and flexible repayment terms. For instance, Muthoot Fincorp’s Loan Against Property has a lower interest rate compared to personal loans. Besides that, you can opt for a longer repayment tenure.
Crucial rules to follow when applying for a loan against property
Borrow based on your needs
It is essential to borrow an amount that you can conveniently repay with interest over the agreed tenure. Lenders can provide up to even 90% of your property’s insured declared value as a loan, and you will have to pay the remaining as a down payment. It would be wise to keep your monthly EMIs between 60 to 65 percent of your total income.
Therefore, you will need to assess your repayment capacity to borrow a loan amount and determine EMIs that you can afford to pay. Having high EMIs would cause a reduction in your monthly income, due to which you will have to compromise on other financial goals like your children’s education, retirement plan, etc.
Choose a short repayment tenure
It is worth noting that longer repayment tenure will lower your monthly EMIs, but it will cost you more overall interest. A typical loan against the property’s tenure ranges between 10 to 20 years.
So, if you have the budget or when your income rises, you can ask your lender to give you a shorter term. Although you will have to pay a higher EMI, it will reduce the burden of your loan.
Make on-time payments of EMIs
It is no secret that defaulting or delaying your EMI payments can cause further financial trouble. When you default on payments, you will have to incur penalty charges for non-payment, and it will also reflect poorly on your credit score.
A lower credit score reduces your chance of getting a loan in the future. So, it would be prudent to repay the loan amount with interest on time as defaulting can bring penalties, increase your interest rate, and reduce your credit score.
Opt for a LAP loan insurance
Taking a home renovation loan means that you are opting for a higher loan amount. In such cases, it is vital to apply for an insurance policy as well. The benefit of having insurance is that it can financially protect your family in the case of an unfortunate event. Your family members will have to bear the responsibility of repaying the loan amount.
Carefully read the fine print
While applying for a LAP loan, it is crucial to read and understand the fine print. Besides being aware of the loan against property eligibility, you should also understand the lender’s late payment penalties, foreclosure fees, processing charges, and administration charges applied to your loan. Sign the document after completely understanding the terms and agreeing with them.
Suppose you want to apply for a LAP loan to cater to your financial requirements. In that case, you may want to consider Muthoot Fincorp’s Loan Against Property to avail of lower interest rates and flexible repayment terms. Before doing so, do check the loan against property eligibility criteria and ensure to meet them.