If you have a stable job or a profitable business with an experience of over two years, a healthy bank balance, and low credit utilisation ratio, availing a loan should not be a challenge. However, not everyone is lucky enough to have everything in shape.
The greatest benefit of a loan against property is that it allows anyone, irrespective of their credit score to apply for a loan. However, some lenders do prefer borrowers with a 750-mark on their credit report.
A loan against property requires a residential or commercial property as collateral. Against the security of an asset, a loan against property offers several unparalleled benefits like lowest interest rates, relaxed eligibility criteria, easy documentation, higher loan term, simple application process, and quick loan disbursal.
As a loan against property is granted against a property, you may ask yourself the question – is my property safe? Read on to find out.
The Safety of a Loan Against Property
The one-word answer to the question is a resounding ‘YES’. However, it is better if you select a reputed lender who is registered under the Companies Act, 1956 and has many years of experience in the lending industry. It is also wise to check the lender’s credit rating. Generally, a credit rating of CRISIL AA or CARE AA is regarded as the benchmark.
Hence, if you choose a reputed lender, your property and the loan is as safe as the company’s reputation. However, as a borrower, you need to follow a few things to ensure that you and your property stay safe.
Things to Keep in Mind as a Borrower
To increase the safety quotient of a loan against property, you may keep the following tips in mind.
Borrow What You Can Afford to Repay
A lender usually approves up to 60% of your property’s present market value as the loan amount. The loan amount may also depend on your income and the credit score. They prefer if the net EMI amount does not exceed 50% of your net monthly income. However, if you want to get the lowest loan against property interest rates, keeping the net EMI amount below 30% of your net income may give your loan application a healthy boost. Additionally, less pressure on your finances also means a lower probability of loan default.
Choose the Best Lender
The process of selecting the best lender may seem easy. Look at who is offering the lowest loan against property interest rates, and you have found the best lender. But, it is not always as easy as it seems. A lender might show you attractive interest rates and impose higher charges on foreclosure and prepayment and have a higher loan processing fee. Hence, before selecting the best lender, you must look at all charges of the lender and take the right decision.
Make Use of the Balance Transfer Facility
In the age of the internet, it is easy to inquire about a lender. If, after availing a loan against property, you find that there is another lender who is offering more benefits than your current lender, you may shift your loan to the new lender. However, before transferring the loan to a new lender, look at the cost of closing the existing loan and applying for the new loan.
Other than lowest interest rates, a loan against property can offer you various benefits which no other loan can offer. If you select the right lender, your loan is not only one hundred per cent safe but can also provide you with the best way to augment your credit score.