Property, undoubtedly, is an asset for any individual. It can be used to make rent or borrow money by opting for a loan against property (LAP). Yes, you can take a loan to a fixed percentage in lieu of the market value of your property without any restriction on the end usage.

The loan against property is a secured loan which is available for both: self employed individual as well as salaried. This loan can be used by mortgaging any type of property, residential or commercial and use the concerned amount for certain needs like wedding expenses, medical emergencies, growing your business, and others.

Following the below-mentioned steps will ensure that you make most from loan against property:

Conduct a Thorough Research

There are many financial institutions which provide loan against property. Do not opt for the first one in the line; it is necessary to conduct a proper research on the same and then go on for settling the bank or NBFC. Some of the important things to compare before sealing the deal include rate of interest, processing fees, accompanying fees, statement charges along with foreclosure charges.

Long-Tenured Loan is the Way to Go

Whether you apply for loan against property to expand your business or to attend some personal needs, you will be better off with a longer repayment tenure that will not only reduce your EMI but will also allow you to collect a corpus to make partial prepayment or foreclosure of the loan in future. Shorter tenures, on the other hand, will result in higher EMIs that will add to the financial burden as well as increase the risk of default.

However, before you take any decision regarding the tenure and prepayment plan it is important to glance through the prepayment charges as proposed by the lender. It is also necessary to ensure that it does not reduce the savings you would make through prepayment.

Over-Leveraging is a Strict No

As loan against property gives you an opportunity to avail greater loan amount (up to Rs. 50 crores) at lower interest rates (normally starting from 9.5 per cent) many borrowers are tempted to over-leverage and opt for amount way in access to their requirement.

This increases the risk of default which may even lead to the risk of losing the property. It must not be forgotten that the lender, after all, has the right to recover his money by selling the property in cases of defaults. It is, therefore, in your interest to take a loan as per your requirement and capacity to repay.

Look Before You Leap

This basically means checking every detail before opting for the lender. It must be noted that the one who charges minimum interest might not be the right financial institution for you as other points like prepayment or foreclosure charges, processing fee, penalty for late payment and loan to value ratio are equally important. Only after taking all these factors into account should one decide on the lender whom he should opt for.

The above account clearly illustrates the importance of loan against property. However, it must be understood that applying for it without understanding your requirement will defeat the very purpose of loan against property. It is, therefore, in the best interest of the applicant to carefully understand his requirement and approach the situation accordingly. Carefully observing the points mentioned above will ensure that you make the most from loan against property.