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Tuesday, December 29, 2020

A Few Mistakes to Avoid While Applying for a Loan Against Commercial Property


Anyone of us can face sudden cash flow challenges at any point in life. It might be for an emergency medical expense, or for a college or university admission purpose, or it might be an unexpected cash crunch in the business. In such times, opting for a loan against commercial property can be a good option. It can help the borrower with a higher borrowing capacity as compared to any other unsecured loan options. But do you know what exactly a loan against property is, how it works and how to avoid glitches while applying for the same? If not, then you are at the right place, reading the right thing.


What is a Loan Against Property?


A loan against property or LAP is a secured loan option that is given to the lender against a commercial or a residential property like a flat, a house, an office or a shop. In this case, the property works as the collateral and it has to be self-owned with a marketable & clear title. The borrower can use this loan to fund his business or for any kind of other personal purposes like a marriage, an emergency medical emergency, a college admission, or so on. While applying for this loan, the borrower has to be eligible to apply for the same. The lender usually determines the loan eligibility through the lenders’ income, their credit history and their present value of the property against which they are wishing to apply for a loan.


What Mistakes to Avoid While Applying for a Loan Against Property?


If you have already decided on apply for a loan against commercial property for meeting your monetary needs, then you should look at these mistakes and make sure that you avoid these for a smooth application process.


Not Comparing the Interest Rates: While choosing a loan lender for LAP, it is imperative to research well about the interest rates that they are likely to offer. Comparing the interest rates between the lenders and then choosing the one which is the most affordable will help you in lowering your EMIs.


Not Reading the Loan Agreement Well: A lot of borrowers do not read the loan documents properly before applying for a loan. This is a grave mistake as oftentimes, they find out after the application process that they have been duped by the lender in several ways.


Not Paying Attention to the Loan Tenure: The tenure of any loan is important. So, make sure that you do not opt for a tenure which is longer solely because the lender is offering you with one. In case you are eligible to pay back the loan amount sooner, go ahead with that. Basically, a shorter loan tenure will attract a lower interest on the outgo amount.


Not Paying Attention to the Credit Score: We all know that LAP is a secured loan, however, it is important to take the credit score in consideration will applying for a LAP. If your credit score is higher, you can get the loan on favourable terms and your chances of the application getting approved also gets increased.


Not Paying Attention to the Disbursal Time:A LAP usually takes time to process but if the lender is a well-known one, your loan amount can get approved as early as possible. You should enquire about the disbursal time from the lender so that you know well when your money will be put into your account.


Conclusion


All said and done, a loan against commercial property can be a great option for you to obtain sudden funds when you are in a cash crunch. It will unlock the equity that’s hidden in your property. So, it is important for you to utilise this avenue prudently and make sure that your loan application get approved easily and on time.


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