Do’s and Don'ts while applying for Loan Against Property
If you are in urgent need of funds and have a property, it is easy to avail a Loan Against Property. Before applying for the loan, there are some do’s and don’ts you should pay attention to. Read further to know more.
Are you dealing with inadequate funds? Here is an opportunity to get a secured loan against your Residential or Commercial property. Getting credit at a cheaper interest rate is now possible if you opt for a loan against property or LAP. This type of loan facility lets you mortgage your property and allows you to fund a medical emergency or a significant event like a marriage or education. When it comes to Loan Against Property eligibility, both salaried and self-employed candidates can apply for it.
While applying for a Loan Against Property, there are things you should keep in mind. Below are some of the do’s and don'ts:
Do’s of applying for LAP:
- Evaluate the risks, as pledging your asset against a credit option puts the asset under a state of vulnerability. However, if you have your finances in order, you need not worry about such a situation. It is wise though, to keep yourself informed of the worst case scenario
- Loan Against Property has a longer repayment tenure, which in a way lowers the monthly instalments but also means higher interest payments. Hence, when you apply for a LAP, make sure to shorten the loan tenure if possible, to pay lesser overall interest
- Before picking a bank or a financial institution for a Loan Against Property, make sure to compare the various offers, interest charges and features. For instance, you can opt for a LAP from ICICI Bank that provides loans starting at the rate of 8.35%* p.a. along with special offers.
Don'ts of applying for LAP:
- Even though you may require a higher loan amount than the value of the property, it is best to apply for a loan amount that you can pay back easily. To be able to pay your loans easily, try to ascertain the debt-to-income ratio and the amount you can keep for the monthly EMI
- Refrain from missing out on the EMI once the loan tenure begins, as the bank will likely charge late payment fees. Defaulting on loan repayments also drops the credit score. This later affects the future of your loan borrowing capacity
- If you're using finance to purchase a new house, you can claim tax benefits up to Rs 3.5 lakh on the interest payments under Section 80 C (Rs 1.5 lakh), 24B (Rs 2 lakh) and 80EE (Rs 50,000). A first time buyer only can avail tax benefits through the above-mentioned Acts. So, the total amount that can be claimed by a first time buyer is Rs 4 lakh with tax benefits. For Loan Against Property, a customer who is a businessman can claim full interest through Section 37(I) of the Income Tax Act. One can also claim tax deductions for the expenses incurred over documents required for Loan Against Property.
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