Taking a property loan? Read this first!
Here is the list of Dos and Don’ts of borrowing a property loan, so that you can quickly raise money for your business needs.
Owning your own property is the best investment to make, indeed. It is one of the best assets one can create for the future, since it normally appreciates in value and is quite liquid. Moreover, it is possible to borrow money to purchase it, and it is also possible to borrow money against it. The former is known as a home loan while the latter is a loan against property.
Both these property loans are given by financial institutions and banks after assessing the property and the applicant’s credentials, among many factors. Availing of these property loans is simple enough, if you follow a few Dos and Don’ts before and while applying for the same:
Dos…
Find out your eligibility. Your income, age and credit history determine your loan eligibility. Find out what the eligibility is before you make the application. You can use an online eligibility/mortgage calculator for the same.
Assess your need. In case of the home loan, assess your finances and how much money you can pay over and above the loan you get. Most financial institutions do not give more than 80% of the house’s value by way of the loan. So you must raise the remaining money yourself. In case of the loan against property, you will not get above 65% of the property’s value in the loan.
Get a pre-approval first. A pre-approval of loan is a process in which the lending institution studies the applicant’s eligibility and approves a certain loan amount. The process is important to reduce disbursal times at a later date. The pre-approval is valid for a period of three to six months, during which the applicant may select a property for purchase.
Don’ts…
Make the application without checking eligibility. Most people start the application process without checking their eligibility first, which wastes time at a later date. Instead, you can simply use an eligibility calculator or mortgage calculator to find out how much loan amount you are eligible to get.
Apply with a bad credit history. You might have unpaid loans borrowed previously or even a defaulted credit card loan. Lenders check each applicant’s credit history before proceeding with the application, and a low credit score will set back the application by a few steps. It is always better to clear all outstanding dues to improve the credit score before applying for the property loan.
Sign up without research. You can find out the rates of interest and loan amounts being offered across lending institutions across comparable products. Some lenders are open to negotiating the interest rate, while others may reduce or waive off processing fees. This way, you can find the loan that best suits your needs.
