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Important Dos And Don'ts When Taking A Loan Against Property

  • Highlights

  • Do evaluate all risks and choose the smallest tenor you can

  • Don't take more than you can repay and default on EMIs

  • Do opt for Balance Transfer features to make borrowing simpler

  • Don't miss out on tax benefits you can get via a loan against property

When you need quick, substantial financing on simple eligibility terms, then a loan against property (LAP) may fit the bill perfectly. It is a secured loan that you can obtain by pledging a property you own as collateral. Since the asset pledged is a valuable one, you get impressive benefits like long tenors and low interest rates.

However, being a high-value loan, it's important that you run it through a checklist in order to make sure that you get the best features and also ensure that repayment stays within your reach. To help you do this, here are some guidelines to follow when taking a loan against property.

Do: Evaluate The Risks Involved When Signing Up

Whether you take a loan against a residential property or a loan against an industrial property, availing of a loan against property puts your asset in a state of vulnerability. While there is nothing much to worry if you have your finances in order, it is always good to be informed of what happens in the worst-case scenario. To evaluate, you need to know everything about the loan against property you are considering and learn about what is a loan against property lien.

Don’t: Take More Than You Will Be Able To Repay

Even though you get high-value loan amounts through loans against property, you should only take an amount that you foresee you can pay back. You can ascertain this by checking your debt-to-income ratio and determining how much you can set aside for EMIs.

Do: Opt For The Shortest Possible Tenor

When taking a business loan against property or a mortgage loan for personal needs, find the shortest possible tenor length that you can manage. This is because, while long tenors make EMIs smaller and help you to meet other business and personal needs, they also mean larger overall interest payments.

Features and Benefits of Loan Against Property

Don’t: Delay On EMI Payments

Defaulting on EMI instalments damages your finances. Firstly, you incur additional late payment fees and charges. And secondly, your credit score drops. The latter makes it more difficult for you to borrow funds affordably in the future.

Do: Compare Lenders And Their Unique Offerings

Lenders offer varying features on their loans against property. Meaning that, one lender’s offering may be better suited to your needs than another’s. For example, Bajaj Finserv’s Loan Against Property comes with Flexi Hybrid features that allow you to borrow from your sanction in parts, pay interest only on the amount used, make prepayments and foreclosures at nil extra fees and even service interest-only EMIs in the beginning of the tenor. These features make it one of the most distinguished loans against property in India.

Don’t: Forget To Claim Tax Benefits

While you may not find tax deductions on a loan against property upfront, you can get benefits depending on a case-to-case basis. For example, if you use the finances to purchase a new house, then you can claim tax benefits of up to Rs.2 lakh on interest paid under Section 24B of the IT Act. Similarly, Section 37(1) can help you claim expenses such as loan against property document charges as business expenditure.

If you are wondering how to get a loan against property, then the most convenient way is to check your pre-approved loan offer from Bajaj Finserv. Doing so gives you instant approval and a chance to apply via a customised deal online.

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