There are times when you need a significant amount of money quickly during a cash crunch. And in times like these, personal loans against property are the most exceptional help one could rely on.
You’ve probably seen billboards and online ads from lenders touting their ‘low-interest’ rate loan against property plans and how they’re different from the competition.
While these may seem pretty impressive, it is your responsibility to verify the authenticity of such claims before opting for any loan in the first place.
Here’s what you need to keep in mind before you avail of a loan:
You can check your personal loan eligibility online, to take a loan against property. for example- PNB Housing’s home loan eligibility calculator. Most banks operating in the country also offer this facility.
If your credit card or loan application gets rejected, keep in mind that it is recorded duly by credit bureaus. Before submitting your personal information and papers, it is usually a good idea to double-check your eligibility.
Research and compare:
There are various costs, fees, and charges that need to be considered while applying for a loan. So keep in mind to think smart and choose the proper schemes that suit your requirements.
Have a thorough understanding of interest rates and loan types. Once you’re done researching the market both online and offline, all you need to do is select a lender with a solid reputation for offering low interest rates and a flexible repayment schedule.
People often make the mistake of going overboard when it comes to availing of personal loans, leading to a lot of stress, especially when you feel like you have borrowed way more than you can repay.
So keep in mind to avail loans based on how much you can afford, so repaying it wouldn’t be an impossible task.
In simple words, do not exceed the limit of borrowing money.
Here’s how you can see it, the total EMIs of your debts should not exceed 40% of your income.
Choosing shorter loan tenures:
Tenure is the pre-agreed time period, which can be calculated in months or years between the lender and borrower, for the borrower to repay the principal and interest in full to the lender.
An inappropriate tenure can lead to unnecessary consequences such as a prolonged loan payment, higher interest rates, higher EMIs, and so on.
Longer durations are considered to be appropriate for some loan kinds, while shorter durations are mostly advised. This is because it is a secured loan. Loans like home loan terms can commonly extend up to 30 years.
Personal loans are unsecured, so most lenders only sanction a limited amount, primarily up to a maximum of Rs 5 to 10 lakh. This amount is supposed to be repaid over 2 to 4 years.
Credit scores (commonly referred to as CIBIL scores) indicate your financial history and market credibility.
When you make late payments, this results in penalties which can, in turn, harm your credit score. Also, keep in mind that a lack of discipline when it comes to repayment can tarnish your credibility.
In this case, it would be difficult for you to borrow money from lenders in the future.
Investing your loan amount:
There is always a danger of risk in returns when investing in channels such as stocks, shares, or bonds.
If you avail of a loan to fund an investment, you must guarantee that the returns on your investment exceed your EMIs. Since markets are unpredictable and the risks involved are incredibly high, one should avoid taking on a loan to invest.
There are exceptions to this, where seasoned investors take on a loan and associated risks by investing it in long-term instruments with somewhat guaranteed returns.
The key here is they tend to have a steady source of additional income that can absorb the risk involved.
Understanding the loan agreement:
Most people often have a terrible tendency to sign loan agreements in haste. This lapse of scrutiny is best avoided. Keep in mind that the contract contains all of the loan’s terms and conditions for which you are liable.
Missing this step may cause you problems in the future in case of any unforeseen market changes.
All the above points must be kept in mind while planning for and availing of a personal loan to make life a little less complicated and free from unforeseen financial liabilities.