A secured mode of finance that can give you considerable funds for a range of needs, there are several myths surrounding loan against property (LAP).
Falling prey to these can prevent you from utilising it to the fullest and making an impulsive and wrong decision. This blog aims to highlight such myths and bust them so that you base your decision on facts. Let’s begin.
You Can’t Use Your Pledged Property
This is probably the most common loan against property myth. Generally, borrowers believe that they can’t use the property pledged as collateral to obtain funds. As long as you don’t default on payments, you are well within your rights to use the property.
However, if you default on payments and fail to repay, the lender has the right to sell the property to recover the dues. Hence, make sure to pay EMIs on time as any default lowers your credit score. It’s a good idea to automate EMIs by giving standing instructions to your bank as it eliminates chances of default to a great extent.
There’s Restriction on the Usage of Funds
against property. You can use the funds in any legitimate manner you like, be it personal or business needs. You can use it for:
- Expanding your business
- Paying for your child’s higher education
- Meet working capital needs
- Deploy new technology
In a nutshell, you can use the funds as per your liking. Having said that, it’s advisable to be prudent with its usage.
You Can Pledge Only a Residential Property
Apart from a residential property, you can also pledge commercial property to obtain funds. In other words, loan against property is not only restricted to residential premises. So, if you own any factory or an office in a commercial building or even a warehouse, you can pledge the same to receive funds.
Whichever property you are pledging, make sure that the paperwork is complete and up-to-date. This is because documentation plays a key role, and the absence of any important paper could lead to your application being rejected.
Loan Against Property has a High Rate of Interest
No, it doesn’t. Since this loan is backed by collateral, the interest rate is on the lower side. Having said that, interest rate also depends on the borrowers Credit score and repayment capacity.
A high score with good repayment capacity helps in availing of the loan at a competitive rate of interest. It’s advisable to compare interest rates before proceeding with the deal.
You Need to Be in the High Income Bracket to Avail This Loan
While income does matter in terms of loan amount eligibility, however, even if you are in the moderate-income bracket, can you avail of this loan.
Make sure to show your lender that you have a repayment plan in place, and you will not default on payments. Keep your liabilities low and ensure you don’t default on your EMIs during the loan tenure.
To Conclude
With a competitive rate of interest, a loan against property can help you fulfil a range of needs. It’s a good way to monetise your assets. However, before signing, do read the fine print, consider processing and other charges and, make sure you understand the clauses fully. You can avail of loan against property from Grihum Housing Finance with minimal documentation and at a competitive rate of interest. Click here to know the product offerings and fill up this loan against property application form, and our representatives will get in touch with you to get your loan process completed.
