01 DECEMBER, 2021

There could be times when you need funds but have no ready cash. It's not uncommon for people to invest their extra money in real estate. It gives them returns while enriching their portfolio. However, it can be challenging to liquidate real estate in a short time. Thankfully, the concept of loan against property exists. To meet your financial needs, you can leverage your property to borrow money against it.

However, there are certain dos and don’ts that you must remember while availing a loan against property.

Dos

  • Choose the lender carefully

The loan amount can be significant which can further increase with the different costs and interest rates charged by the lender. So, you must choose the lender and loan type carefully. You must choose a lender who offers affordable interest rates and is reliable as well. It would be best to do your research, get a quote from various lenders and then decide. Also, do not choose a lender only based on their interest rates. You must also consider other costs and charges while finalising a lender.

  • Evaluate your needs and risk

Before you apply for loan against property, ensure to evaluate your needs and the risk involved in availing this loan. If you default, you can lose your property. Ensure to review your finances and know all the aspects of the loan before taking the decision.

  • Read the fine prints

You must know all the aspects of the loan agreement. There could be hidden charges or terms and conditions that can alter your loan terms. Before signing below the dotted lines, ensure to read the fine prints of the agreement carefully.

  • Opt for shorter tenure

The tenure you opt for a loan against property can impact your overall cost of borrowing. Opting for a longer tenure would reduce your EMI and could make it more affordable for you. But it will increase the overall interest. On the other hand, with short tenure, you can repay the loan faster and save money. So, if you can afford it, opt for a shorter tenure.

Don’t

  • Borrow more than you can repay

You can get a huge amount of money against your property. However, that does not mean that you borrow the entire amount of the property value. You must consider your affordability. You must borrow only that much amount which you would be able to repay comfortably. It would be best to check your affordability and financial viability by using an EMI calculator.

  • Do not skip payments

Do not skip your EMIs. The lender can levy a high late payment fee if you default on the EMIs. Skipping payments can also reduce your credit score and affect your borrowing capacity.

While availing a loan against property check your affordability and furnish the adequate documents required. Also, inquire about the tax benefits that you can claim on the interest repayment. Moreover, do factor in the disbursement time, as it can be long, because lenders carefully evaluate your loan against property eligibility and property while processing the application. So, what are you waiting for? Apply for a loan against property now to fulfil your needs.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.