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Tips to Manage Loan Against Property Repayments Efficiently_WC

3 min 21 Feb 2023
Loan Against Property Repayment Management Tips
  • Simple Tips to Help You Repay Loan Against Property Efficiently

If you are planning to take a Loan Against Property, know that this finance option involves collateral and therefore, one must make sure to repay this loan as per the amortization schedule given to them. Delays and missed EMI payments not only attract a penalty but can also jeopardize the safety of the property pledged as collateral. In this article, we focus on simple tips that make repaying a Loan Against Property simple and easy. 

Simple Tips to Help You Repay Loan Against Property Efficiently

Follow these tips to ensure you clear your dues in time and without stress.

Clear High-Interest Loans First

Since we are talking about Loan Against Property payments, let us familiarize ourselves with the concept of Debt Avalanche.

Debt Avalanche is the process of clearing high-interest loans first. When an individual clears high-interest loans first, they essentially reduce the total interest payable. Thus, clearing loans that are drawing a higher interest rate first allows an individual to save more money in the long run. So, if you are dealing with more than one loan, prioritize.  

Increase your EMIs Every Time Your Income Increases

How to repay Loan Against Property quickly? Increase your EMIs with each passing year. Whether salaried or self-employed, every individual works towards growth. In simpler words, it does not matter what your profession is, if you are good at what you do, your income will increase with each passing year and every time your income increases, make sure to increase your EMIs accordingly. If you keep increasing your EMIs on a yearly basis, you will be able to become debt-free much sooner than you had imagined.

Opt for Debt Consolidation

How to repay loans against property efficiently? Well, choose to consolidate debt. Debt consolidation is the process of taking one loan to combine all your loans into one. If you have multiple loans running at the same time, keeping track of payment due dates becomes difficult. This, in turn, leads to missed EMI payments. Missed EMI payments not only draw a penalty but also negatively affect your CIBIL score. Therefore, borrowers are often advised to take a debt consolidation loan to pay off all other loans. Debt consolidation loans come with a long repayment tenor and low interest rates. Thus, when one opts for debt consolidation, not only do they make paying off their loans easy but also save on the total interest outgo. 

Use Windfall Gains to Make Prepayments

If you are working and you get a big bonus, use the money to prepay a part of your loan. This will reduce the principal amount, reduce your loan tenor and allow you to become debt-free sooner than you had imagined. Similarly, if you are a self-employed individual and you got a big order, use the profits to part prepay your loan. This technique will allow you to become debt-free sooner.

While we are on this topic, borrowers must also know that individuals who have opted for a Loan Against Property on floating interest rates can part prepay or foreclose their loan at no additional cost. Similarly, borrowers on fixed interest rates can also make part payments without paying any fee if they prepay the loan using their savings alone and not by borrowing money from a third party.

Opt for a Long Loan Against Property Repayment Tenor

Often borrowers opt for a short loan tenor because they want to get rid of the loan burden as soon as possible and save on the total interest outgo.

However, this is a mistake that people should avoid making. Opting for a short tenor is a good idea only if you can conveniently afford the EMIs you have opted for. In case the EMI you have chosen is too high for you to be able to afford comfortably, opt for a shorter tenor. While this will increase your total interest outgo, it will also allow you to become debt-free without feeling burdened. 

Also Read: Short Tenure vs. Long Loan Against Property Tenure - Which Is Better?

Opt for a Loan Against Property Balance Transfer 

Loans against property are long-term loans that run over a period of up to 18 years. Paying EMIs for such a long period can begin to feel burdensome, especially if your lender is charging you a high interest rate on your Loan Against Property. One of the easy ways to solve the problem of high interest rates is to opt for Loan Against Property balance transfer.  

Loan balance transfer refers to the process of transferring one's loan from one lender to another, primarily in return for better interest rates. Borrowers must know that loan balance transfer makes sense only during the initial years of loan repayment when the interest component of the loan is still quite high. 

Make Becoming Debt-Free Your Life's Priority

If you truly want to become debt-free as soon as possible, you must begin to make certain lifestyle choices.  

If you are paying a big-ticket loan, such as a Loan Against Property, you must practice financial discipline. Do not spend too much on luxuries. In other words, do not go out drinking every weekend, reserve the five-star dinners for special occasions, do not carry your credit card if you are going to the mall for shopping, clear your entire credit card bill each month and not just the minimum due.  

If you are someone who finds it hard to practice budgeting, ask your credit card company to lower your credit limit. This will help you keep your expenses within the budget. Further, do not take any new loans until you have repaid your Loan Against Property in full. Practicing these things won't be easy but they will certainly help you reduce your loan burden. 

Borrow What You Can Easily Repay 

How to manage Loan Against Property repayment efficiently? Borrow what you can easily repay. Under LAP, lenders sanction anywhere between 50% to 70% of a property's value as a loan. So, if your property is worth a Crore, lenders will easily agree to sanction you a loan for up to Rs.70 Lakh. However, just because you can avail of an amount as high as this doesn't mean you should. Borrow what you need and what you can easily repay. If you practice this, paying off the loan will become a breeze. 

We hope these simple tips and tricks discussed in this article will help you to repay your Loan Against Property efficiently and become debt-free as soon as possible.  



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