If you are looking for emergency funds at a reasonable interest rate but don’t want to go for a personal loan, HDFC loan against property is something you can choose to go with. With this, you can raise funds for your personal and business needs as well. Being secure in nature also means the rate of interest on this type of loan is usually on the lower side.
1) Property Valuation: As you know different types of property can be used to get the LAP with the lending institution. The financial institution from which you are planning to get the loan will compute the market value of your home based on current market prices. The lender may sanction a loan amount of up to 70-80% of the value of your property based. Different lenders use different criteria to compute the price of your property. As a result, the valuation of your property may differ from one lender to the next and this is one of the reasons why it is suggested that before narrowing down the lender, you should ask around for the best property valuation.
2) Interest Rate: Although the interest rate for LAP is substantially lower than that of Personal Loans, conducting market research to compare interest rates is always a smart idea or you can do HDFC Loan against property EMI Calculator. Furthermore, different lending institutions have varied interest rates, so don’t hurry with the first offer you are getting from the bank.
3) Loan Repayment Period: When you take LAP, borrowers will be given a longer repayment period. The loan repayment duration varies from lender to lender. You must establish a balance between tenure and EMIs as a borrower. Apart from this, you should also understand the type of interest they are offering you. When it comes to variable interest rates, the compounding effect comes into play, which may change your EMIs if you have a longer loan period. It is suggested that you take the help of HDFC Loan against property EMI Calculator. Take help from the expert or the bank official to get clarity on this.
4) Ownership of the Property: To avail of the HDFC loan against property, the borrower has to pledge their own property as security. The banking institution has a right to reject your loan application if the property you are pledging is disputed or the paperwork you have submitted to them is incorrect or inadequate. This usually happens when you own a joint property and in that case, consent is required.
5) Missing out on Processing Fees and Prepayment Charges: Another mistake to avoid when taking out an HDFC loan against property is checking the processing and prepayment charges. Considering the LAP is a large loan, every cost counts. If it is high, it may significantly increase the cost of borrowing. Every banking institution charges processing fees and they are usually nominal. The amount varies from 0.5% to 2% of your loan amount. While you are checking the processing fees, you should also check the prepayment penalties. Prepayment charges are imposed when you foreclose your loan before the loan’s actual duration as specified in the sanction letter. If these costs are not considered, they can cause substantial issues later on. As a result, you should not just base your selection entirely on interest rate for a better idea, use HDFC Loan against property EMI Calculator. Instead, consider the other fees associated with this loan also.
6) Missing the Disbursal Date: The time it takes to disburse the HDFC loan against property to you is known as disbursal time. Disbursement time is often a few days because lenders must officially evaluate the property’s value before approving your application. As a result, if you require funds quickly, you should choose a lender who can disburse the funds as soon as possible.
7) Not Considering Other responsibilities: Before applying for an HDFC loan against property, you should be aware of your existing responsibilities, and your debt-to-income ratio should not be too high. Lenders use this percentage to determine if you will be able to repay the money you borrow on time. If you are already servicing other high-value loans, it is best to choose a loan amount that you can comfortably repay. Also, ensure that you have a solid credit score with the bureaus so that you can avail of the loan on simple terms and at a competitive interest rate.
8) Not considering the Loan to Value Ratio: The most often used ratio in home lending is the LTV, or ‘Loan to Value ratio.’ It is used to assess how much of a downpayment is required and whether the lender will be able to grant credit to the borrower. LTV is an important ratio to consider when purchasing a home since it allows lenders to decide the level of risk they accept when underwriting a loan.
9) Neglecting your credit score: Despite the fact that your loan against property is secured, your credit or CIBIL score will be reviewed during the application processing stage. Your credit score can work in your favour or against you while your loan application is being processed. A higher credit score, for example, can assist you in obtaining a loan with a more favourable EMI and tenure, while also boosting the likelihood that your application would be granted in the first place. In case your CIBIL is below 750, it is suggested that before submitting your loan application with the bank, you should improve your CIBIL score by taking conscious efforts like clearing your existing liabilities, not just paying the minimum amount but the full one.
Conclusion
A Loan Against Property loan is the best option for addressing your financial needs as a property owner. The interest rate is usually lower than the personal loan and to understand how the loan is costing you, use HDFC Loan against property EMI Calculator. You must have all of your paperwork available and meet the LAP eligibility conditions given by your lender. You may find all relevant information on the lender’s website. Speak with your lender about the papers you’ll need to give to speed up the loan approval process if necessary.
