Property loans have been one of the most popular financing options availed presently, especially after the steep economic slowdown that the pandemic brought country-wide. One of the prime advantages of these loans is that they prove useful in all types of funding needs. It is because lenders do not put any restrictions to the end-use one can put a loan on property to. So, depending on why you need the funding for, these loans can be utilised for expenses as versatile as higher education to overseas travel, and wedding.
Further, benefits like a long repayment tenure, financing easily extending to crores, affordable rates of interest, and such make them further desirable advances. However, when availing a mortgage advance such as a property loan, there are a few essential rules one ought to follow. Given below are some of them.
Important Rules to Stick By When Availing a Property Loan
Match the borrowing amount with your affordability
Reputed lending institutions provide property loans extending up to as much as Rs.30 Crores with ease if one holds the right eligibility. While this can be a welcome information for many, a high-value loan availability does not mean you should borrow as much is available as per your eligibility.
For prudent borrowing, it is always advisable that you borrow only as much as seems affordable and accommodates conveniently in your financial standing. To check how much EMI suits your monthly income while sparing enough for your disposal and how much gets too much, you can use a property loan EMI calculator.
Choose the shortest duration available
A loan on property is a long-term advance with repayment tenure extending as long as 30 years. It makes repayment feasible for many across income categories. This is because such a long tenure provides necessary flexibility of choosing a suitable repayment term to borrowing individuals. However, even though a long tenure availability is desirable by most borrowers, it does not always guarantee long-term affordability.
In fact, choosing the longest tenure available for property loan repayment often indicates increased interest payment, even though the EMIs are reduced. It is because interest is the cost recovered by the lender for the time involved in lender. Hence, the longer the tenure, the higher interest one has to pay.
Ensure to repay loan in time and in full
When it comes to practising financial discipline when borrowing, nothing calls for it as much as when availing a loan on property. Given that these are long-term advances, property loans require individuals to keep a thorough repayment history with EMIs paid in time. Sticking to the repayment schedule is the only way to release yourself of the high-value liability that a property loan renders. Timely repayment of the advance over the tenure also ensures that you create a long creditworthy history, beneficial in availing advances in the future.
Insure your loan
Not many people know that when availing a loan on property, one can cover the liabilities so created with an insurance cover available in the market. While it does in no way release you from the repayment liability and still requires you to pay EMIs as per the schedule, a suitable insurance cover definitely keeps your loved ones protected against any liability created out of your unfortunate inability to pay, either through demise or accident.
Borrow only to meet necessary expenses
Your financial profile might qualify you for a high loan value that fulfils several of your funding needs, necessary as well as luxurious. It is, however, not prudent to avail all that is provided based on your repayment capacity to fulfil any funding need available. One of the pillars of following a suitable financial discipline is that you must borrow only as much as is needed for meeting essential expenses. Other expenses should strictly be met through your monthly income while you comfortably repay the existing loan liability.
When availing a loan on property, ensure to fulfil all paperwork requirements before applying to fast-track your processing. Confirm the requirements regarding loan against property documents with your selected lender and keep them handy accordingly. When signing your loan agreement, make sure to read the fine prints of this document as well, which should give you a detailed insight regarding what your loan offer comprises and the levies thereto.