Loans Against Property are a secured mode of financing - a borrower pledges their property as collateral and in return, receives a set loan amount from the lender. The borrower repays this loan in the form of EMIs over the stipulated period. Loans Against Property come with a long tenor stretching up to 17 years. Further, these loans are offered at low-interest rates - currently, Loan Against Property interest rates vary between 9.75%* and 18.00%* p.a.
When a borrower takes a loan against a property, they retain ownership rights over the property they have pledged as collateral. In simpler words, the borrower can continue to use the property as they like even if they have taken a loan against it. Lenders, however, can sell the property for loan recovery in case of loan default. However, even in this case, the borrower is protected by certain rights, terms and conditions. For instance, the lender cannot sell the property for loan recovery without giving the borrower notice as well as enough time to arrange money to clear pending dues and save their property.
There are many things that borrowers do not know about this mode of financing. In this article, we look at common mistakes that one should avoid making while taking a Loan Against Property.
Common Mistakes that Borrowers Must Avoid Making While Taking a Loan Against Property
Not Negotiating for a Low-Interest Rate
The Loan Against Property interest rate you are offered will determine how affordable or easy it will be for you to repay the loan.
Loans Against Property are big-ticket loans often involving a substantial amount of money. Therefore, even a small difference in the interest rate offered can make a huge difference to the total interest paid by you throughout the loan journey. Borrowers must, therefore, negotiate hard for a good interest rate.
Shop for interest rates. Talk to as many lenders as possible and get quotes. Use these quotes to bargain with lenders. Choose a lender once you are convinced that you cannot get a better/lower interest rate than what you have been offered.
Not Considering Processing Fee and Prepayment Penalty Charges
The processing fee for Loans Against Property can go up to 7% of the loan amount, along with GST as applicable. Since Loans Against Property are big-ticket loans, the processing fee turns out to be a major expense that increases the cost of borrowing. Most borrowers do not consider the loan processing fee while calculating the total cost of borrowing.
Also Read: Understanding the Fees and Charges on Your Loan Against Property
Similarly, borrowers also do not inquire about prepayment and foreclosure charges while taking a Loan Against Property. Prepayment penalties or foreclosure charges are the fees one must pay if one decides to close their loan before the stipulated time. Borrowers must talk to their lenders and get clarity on these fees and charges before accepting the loan agreement.
Not Keeping any Buffer Time
As mentioned before, Loans Against Property involve a substantial amount of money and therefore, lenders approve, sanction and disburse these loans after proper due diligence. It is, therefore, not very surprising that loans against property approvals take some time. . While some lenders take weeks to approve and disburse these loans, some lenders are able to sanction these loans within only a few days. So, if you need money urgently, opt for a lender known for quick approval.
Not Having Documentation in Place
As mentioned before, lenders sanction loans against a property after proper due diligence. Therefore, borrowers must be able to provide all the paperwork as and when asked. Most borrowers often do not have all the documents needed for loan approval and processing. For instance, many borrowers apply for a Loan Against Property without income proof. A lender can't sanction a loan against property without ITR. Thus, those borrowers who want to experience a hassle-free and smooth loan journey, must go to their lender's website before beginning the loan application process and check the list of documents required before beginning the loan application process.
Not Reading the Terms and Conditions
Borrowers opt for a loan against a property when they need money urgently to take care of a dire personal or professional need. Thus, sometimes, in their hurry to get money into their account, they forget all about reading the loan terms and conditions. This is a mistake one should never make - Loans Against Property are a long-term expense/commitment and even a small mistake can prove to be costly. So, opt for a lender and submit the application form only if you are fully convinced and agree with all the loan terms and conditions. If there is something you do not understand, hire a lawyer to help you understand the terms and conditions mentioned in the agreement and give your consent once you fully understand and agree with everything.
Not Getting Your Property Assessed
Lenders sanction anywhere between 50% to 70% of a property's value as a loan. However, lenders sometimes undervalue a property. Thus, before beginning your loan against the property application process, hire a professional to assess your property and calculate its value. This will help you get the right loan amount from your lender.
Borrowing More Than One Can Easily Repay
Borrowers who have availed of a Loan Against Property are protected by certain rights. However, it cannot be denied that in case of loan default, they can lose ownership of their property. Since Loans Against Property involve collateral, borrowers must be extra careful about how much they are borrowing and whether they will be able to easily repay what they have borrowed.
Your property may be worth 10 Crore and a lender may be readily willing to offer you a loan of 5 Crore against it but if you don't need that kind of money, don't borrow it. Borrow only what you need and what you can easily repay. This will help you take care of your financial emergency while also keeping your property safe.
Final Words
Loans Against Property involve collateral. Therefore, borrowers cannot afford to make any mistakes with these loans. In this article, we have discussed some of the common mistakes that borrowers make while availing of a Loan Against Property. We hope that being aware of these mistakes will stop you from making them while availing of a mortgage loan in India.
Also Read: Top Benefits of Loan Against Property Over Collateral-free Loans
DISCLAIMER:
While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.
Trending Articles
home+loan Home Loan
[N][T][T][N][T]
Is It Mandatory to Take Insurance with a Home Loan?2023-08-01 | 5 min
tax Tax
[N][T][T][N][T]
How to Claim Home Loan Tax Exemptions and HRA Together2023-03-22 | 5 min
cibil Cibil
[N][T][T][N][T]
How to Increase Your CIBIL Score Above 800: 7 Proven Methods2023-01-24 | 4 min
cibil Cibil
[N][T][T][N][T]
How Does Being A Loan Guarantor Affect Your Credit Score?2023-03-23 | 4 min
tax Tax
[N][T][T][N][T]
Income Tax Structure in New Regime: New Tax Exemption Limit 20232023-03-28 | 4 min
tax Tax
[N][T][T][N][T]
How to Save Tax for Salary Above 30 Lakh?2023-08-07 | 6 min
tax Tax
[N][T][T][N][T]
How to Save Tax Between Rs 20 to Rs 25L Salary in India2023-07-19 | 6 min
tax Tax
[N][T][T][N][T]
How to Claim Tax Benefits on Joint Home Loans2023-07-10 | 4 min
tax Tax
[N][T][T][N][T]
Tax Benefits on Home Loans for Self-Employed Individuals: What You Need to Know2023-06-01 | 4 min
tax Tax
[N][T][T][N][T]
How to Avail Maximum Home Loan Tax Benefit in India in 2023?2023-03-17 | 6 min
tax Tax
[N][T][T][N][T]
10 Useful Income Tax Deductions for FY 2022-232023-02-21 | 6 min
tax Tax
[N][T][T][N][T]
Everything You Should Know About Tax Savings When Taking a Home Loan2023-01-09 | 5 min
home+loan Home Loan
[N][T][T][N][T]
How to Pick the Best Home Loan Tenor that Suits Your Budget2023-06-29 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Understanding Stamp Duty and Property Registration Charges2022-06-29 | 5 min
home+loan Home Loan
[N][T][T][N][T]
How to Pay Off Your Home Loan Quicker2022-06-29 | 6 Min
home+loan Home Loan
[N][T][T][N][T]
How Digital Platforms Are Revolutionising the Face of Housing Finance2023-02-02 | 7 min
home+loan Home Loan
[N][T][T][N][T]
Advantages of Including a Co-Applicant on Your Home Loan2023-02-21 | 7 min
loan+against+property Loan Against Property
[N][T][T][N][T]
Understanding the Fees & Charges on Your Loan Against Property2023-02-14 | 6 min
cibil Cibil
[N][T][T][N][T]
What is CIBIL? Understand How It Works & Its Importance2023-01-31 | 6 min
cibil Cibil
[N][T][T][N][T]
What Does a Zero or Negative Credit Score Mean?2023-02-24 | 4 min
loan+against+property Loan Against Property
[N][T][T][N][T]
Understanding the Fees and Charges on Your Loan Against Property2023-02-16 | 8 min
home+loan Home Loan
[N][T][T][N][T]
How to Connect with Bajaj Housing Customer Care2023-06-27 | 5 Min
tax Tax
[N][T][T][N][T]
Can I Claim Home Loan Tax Benefits on an Under-Construction Property?2023-03-29 | 5 min
cibil Cibil
[N][T][T][N][T]
Check CIBIL Score with PAN Card for Free, in 3 Steps2023-03-28 | 5 min
home+loan Home Loan
[N][T][T][N][T]
ITR Filing for Home Loan – Know the Right Process to File Your Income Tax Returns2023-02-16 | 5 min
tax Tax
[N][T][T][N][T]
Difference Between Old Vs New Tax Regime2023-08-09 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Secured vs Unsecured Loan - Know the Difference2023-08-24 | 2 min
cibil Cibil
[N][T][T][N][T]
What's Considered a Healthy Credit Mix?2023-08-10 | 3 min
home+loan Home Loan
[N][T][T][N][T]
Common Mistakes to Avoid When Applying for A Home Loan2023-08-10 | 2 min
home+loan Home Loan
[N][T][T][N][T]
How to Choose the Best Home Loan?2023-08-09 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Pros and Cons of Taking A Joint Home Loan with your Spouse2023-08-10 | 7 min
home+loan Home Loan
[N][T][T][N][T]
Making Financial Planning Easy with Home Loan EMI Calculator2023-09-06 | 2 min
cibil Cibil
[N][T][T][N][T]
What to Know About CIBIL TransUnion Score 2.02023-08-23 | 3 min
cibil Cibil
[N][T][T][N][T]
How can I Remove Loan Inquiry from CIBIL Credit Report2023-08-24 | 5 min
cibil Cibil
[N][T][T][N][T]
How Many Credit Inquiries are Too Much in a Year2023-09-21 | 2 min
home+loan Home Loan
[N][T][T][N][T]
Difference Between Bank Rate and Repo Rate2023-09-22 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Increase or Decrease Effects of Repo Rate2023-08-29 | 7 min
home+loan Home Loan
[N][T][T][N][T]
Difference Between Co-owner, Co-borrower, Co-Applicant, and Co-Signer in Home Loan2023-08-31 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Understanding the Benefits of a Home Loan EMI Calculator2023-07-12 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What Happens If Home Loan EMI Bounces? Know the Consequences2023-07-11 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Tips to Avoid Rejection of Your Home Loan Application2023-08-01 | 3 min
cibil Cibil
[N][T][T][N][T]
What Is Credit Mix and How Can It Help Your Credit Score?2023-07-12 | 3 min
home+loan Home Loan
[N][T][T][N][T]
Check Housing Loan Eligibility with Home Loan Eligibility Calculator2023-07-12 | 5 min
tax Tax
[N][T][T][N][T]
Comparison Between New Tax Regime vs Old Tax Regime2023-08-03 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Advantages for First-Time Home Buyers2023-07-14 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Tips to Get Home Loan with Minimum Down Payment in India2023-07-11 | 5 min
cibil Cibil
[N][T][T][N][T]
11 Common Myths about CIBIL Score2023-03-31 | 4 min
tax Tax
[N][T][T][N][T]
Top 5 Tax Benefits and Other Advantages of a Joint Home Loan2023-07-10 | 8 min
home+loan Home Loan
[N][T][T][N][T]
What is the Ideal Down Payment for a Home Loan?2023-06-16 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Factors That Determine Your Home Loan Eligibility2023-07-24 | 8 min
cibil Cibil
[N][T][T][N][T]
How to Get a Good Credit Mix and Boost Your Credit Score2023-07-11 | 4 min
home+loan Home Loan
[N][T][T][N][T]
What Is Home Loan Eligibility and How Is It Calculated2023-07-11 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Differences Between Repo Rate and Monetary Policy Tools2023-07-28 | 5 min
cibil Cibil
[N][T][T][N][T]
Pay Minimum Amount Due on Your Credit Cards Will Impact Your Credit Score2023-07-10 | 5 min
cibil Cibil
[N][T][T][N][T]
Will a Loan Settlement Ruin My CIBIL Score?2023-03-21 | 4 min
cibil Cibil
[N][T][T][N][T]
Here Is How a Bounced Cheque Can Affect Your CIBIL Score2023-06-06 | 5 min
cibil Cibil
[N][T][T][N][T]
Does a Name Change Affect Your Credit Score2023-06-01 | 4 min
tax Tax
[N][T][T][N][T]
How to Reduce the Loan Against Property Interest Rate?2023-06-19 | 3 min
tax Tax
[N][T][T][N][T]
What Does It Mean to Have a CIBIL Score of -12023-06-16 | 4 min
home+loan Home Loan
[N][T][T][N][T]
What Happens to a Home Loan in the Case of the Borrower's Death?2023-04-17 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Taking a Home Loan to Buy a Property for Investment? Here Are 5 Points to Consider2023-04-17 | 5 min
cibil Cibil
[N][T][T][N][T]
Introduction to Credit Information Bureau India Limited (CIBIL)2023-04-17 | 6 min
cibil Cibil
[N][T][T][N][T]
Why Is CIBIL Score Important for Your Financial Health?2023-04-17 | 3 min
cibil Cibil
[N][T][T][N][T]
How Can Your CIBIL Score Help in Negotiating Better Home Loan Deals2023-05-18 | 4 min
cibil Cibil
[N][T][T][N][T]
What is CIBIL Score and How is it Impacted by a Missed EMI?2023-05-31 | 2 min
cibil Cibil
[N][T][T][N][T]
The Role of CIBIL Score in Determining your Home Loan Disbursement Amount2023-05-31 | 2 min
cibil Cibil
[N][T][T][N][T]
hat Does Your Credit Score Expose About You?2023-04-17 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Should I Apply for a Pre-Approved Home Loan or an After Property Finalisation Loan?2023-03-23 | 5 min
cibil Cibil
[N][T][T][N][T]
Minimum CIBIL Score for Business Loans2023-04-17 | 5 min
home+loan Home Loan
[N][T][T][N][T]
5 Great Ways Women Can Benefit from Taking a Housing Loan2023-04-25 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What Do You Need to Know About Home Loan Foreclosure?2023-03-23 | 5 min
home+loan Home Loan
[N][T][T][N][T]
A Complete Guide for Home Loan Insurance2023-04-03 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Know All About the HRA Benefit on Payment of House Rent2023-04-03 | 6 min
cibil Cibil
[N][T][T][N][T]
Does CIBIL Score Affect Loan Against Property Eligibility?2023-02-15 | 7 min
cibil Cibil
[N][T][T][N][T]
Tips to Maintain Your Business CIBIL Score Above 7002023-02-02 | 5 min
tax Tax
[N][T][T][N][T]
5 Tax Savings and Other Advantages You Can Get When You Apply for Home Loans2023-02-17 | 6 min
tax Tax
[N][T][T][N][T]
Should You Get a Home Loan to Save Your Taxes?2023-02-20 | 5 min
tax Tax
[N][T][T][N][T]
What is Property Tax in India and How is It Calculated?2023-02-28 | 4 min
tax Tax
[N][T][T][N][T]
8 Different Ways to Avail Tax Benefits on Home Loans2023-03-03 | 4 min
tax Tax
[N][T][T][N][T]
A Closer Look at Four Types of Loans That Offer Incredible Tax Benefits2023-02-16 | 4 min
tax Tax
[N][T][T][N][T]
How Much Tax Can be Saved Under Sections 80C, 80D, and 80G?2023-02-22 | 5 min
loan+against+property Loan Against Property
[N][T][T][N][T]
5 Benefits of Using Area Conversion Calculator2023-02-14 | 6 min
loan+against+property Loan Against Property
[N][T][T][N][T]
5 Important Reasons to Opt for a Loan Against Property to Start Your Own Business2023-02-10 | 2 min
loan+against+property Loan Against Property
[N][T][T][N][T]
What Is the Difference Between Gold Loan and Loan Against Property?2023-03-02 | 6 min
tax Tax
[N][T][T][N][T]
How to Avail of Tax Benefits on a Loan Against Property2023-10-28 | 5 Min
tax Tax
[N][T][T][N][T]
Know all About Top Up Loans and How to Avail of Tax Benefits2022-12-12 | 5 min
home+loan Home Loan
[N][T][T][N][T]
How to Determine Your Ideal Credit Score for a Home Loan?2023-03-30 | 4 min
home+loan Home Loan
[N][T][T][N][T]
How to Get a Housing Loan Approved Instantly?2023-04-12 | 5 min
loan+against+property Loan Against Property
[N][T][T][N][T]
Things to Do If Your Loan Against Property Application Gets Rejected2023-02-14 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What is the Process to Get Your Home Loan Approved Fast with Bajaj Housing Finance?2023-02-15 | 6 min
home+loan Home Loan
[N][T][T][N][T]
A Guide to Statutory Liquidity Ratio2023-02-22 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Get Your Down Payment Funds Ready with These 5 Easy Steps2023-03-20 | 5 min
home+loan Home Loan
[N][T][T][N][T]
5 Strategies to Manage High Home Loan EMIs Effectively2023-02-22 | 6 min
home+loan Home Loan
[N][T][T][N][T]
5 Tips for Lowering Home Loan Interest Rates in 20232023-03-28 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Why Is Credit Score Important for Home Loan Lenders?2023-03-21 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Importance Of a Good Credit Score in The Home Loan Process2023-03-20 | 4 min
home+loan Home Loan
[N][T][T][N][T]
How Do You Overcome Home Loan Repayment Burden?2023-02-13 | 2 min
home+loan Home Loan
[N][T][T][N][T]
Difference Between Home Loan and Personal Loan: Which is better?2023-02-09 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Home Loan EMI Calculator Benefits and It’s Features2023-02-21 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Everything You Need to Know About Top-up Loans on a Home Loan2023-02-20 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Why Paying Home Loan EMI is Better Than Renting a Home?2023-02-20 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Should You Take a Home Loan Even If You Have Enough Money to Buy a House?2023-01-30 | 3 min
home+loan Home Loan
[N][T][T][N][T]
4 Key Benefits of Home Loan Balance Transfer to Bajaj Housing Finance Limited2023-01-09 | 5 min
home+loan Home Loan
[N][T][T][N][T]
Best Credit Score for Home Loans & How to Improve Yours2023-08-31 | 6 min
cibil Cibil
[N][T][T][N][T]
Is a Good CIBIL Score Mandatory for Home Loan Approval?2023-02-17 | 4 min
cibil Cibil
[N][T][T][N][T]
What Is a Good Credit Score for a Home Loan?2022-12-28 | 5 min
cibil Cibil
[N][T][T][N][T]
What is the Role of CIBIL Score in Getting a Home Loan?2023-03-22 | 5 min
cibil Cibil
[N][T][T][N][T]
Importance of CIBIL Score & Tips To Improve It2023-02-21 | 5 min
home+loan Home Loan
[N][T][T][N][T]
How Can Your Credit Score Impact Your Home Loan Interest Rate?2023-02-17 | 6 min
cibil Cibil
[N][T][T][N][T]
A Helpful Guide to Understanding Your Credit Report2023-01-27 | 5 min
cibil Cibil
[N][T][T][N][T]
What is the Procedure to Check your CIBIL Score Rating?2023-03-27 | 4 min
cibil Cibil
[N][T][T][N][T]
Why Is a CIBIL Score Measured Between 300 and 900?2023-02-21 | 4 min
cibil Cibil
[N][T][T][N][T]
What Is Credit Score And Its Impact On Loan Availability2023-03-27 |
cibil Cibil
[N][T][T][N][T]
Everything You Should Know About Your CIBIL Score2023-02-09 | 7 min
home+loan Home Loan
[N][T][T][N][T]
Section 80 EE: Claim Deductions on the Home Loan Interest Paid2023-02-17 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Ways to Check Bajaj Housing Loan Account Numbers2023-01-19 | 3 min
home+loan Home Loan
[N][T][T][N][T]
Benefits of Submitting a Digital Home Loan Application in Current Times2023-02-17 | 4 min
home+loan Home Loan
[N][T][T][N][T]
10 Smart Steps for Effective Home Loan Management2023-02-17 | 5 min
home+loan Home Loan
[N][T][T][N][T]
10 Factors That Affect Your Home Loan Eligibility2023-01-09 | 7 min
home+loan Home Loan
[N][T][T][N][T]
What is Foreclosing a Home Loan? These are Some of the Do’s and Don’ts2023-01-17 | 6 min
home+loan Home Loan
[N][T][T][N][T]
Are Registration Charges Compulsory When You Opt for a Home Loan?2023-02-10 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What Are the Pros and Cons of Home Loan Balance Transfer?2023-02-01 | 4 min
home+loan Home Loan
[N][T][T][N][T]
Five Important Factors to Keep in Mind When Prepaying Your Home Loan2023-01-17 | 6 min
cibil Cibil
[N][T][T][N][T]
How to Check CIBIL Score Online?2023-03-14 | 5 min
home+loan Home Loan
[N][T][T][N][T]
A Step-by-Step Guide to Home Loan Balance Transfer Application2022-12-20 | 6 min
home+loan Home Loan
[N][T][T][N][T]
How to Get a Better Interest Rate on Your Home Loan2023-01-04 | 5 min
home+loan Home Loan
[N][T][T][N][T]
What is the Difference Between Top-up Loan and Home Improvement Loan