Guide for loan against property

The loan against the property is a process of mortgaging the borrower’s property documents to the lender to obtain some liquid cash in hand. There are specific guidelines that the borrower must follow while opting for the loan against the property. The borrower needs to submit the documents with clear titles to the lender. Also, there should not be any co-owner or any other shareholder in the property. It may lead to conflict amongst the borrowers, making it difficult for the lenders to recover the money from the stressed assets.

Another major thing is that the borrower, even while opting for the loan against property, should not default on monthly installments as it may lead to penalties being charged to the borrowers. The installments should be paid on time to avoid paying a liability to the lender. Also, the CIBIL ratings of the borrower may get reduced if the borrower defaults on installments. Even the borrower, while opting for the loan against the property, should read all the documents carefully before applying for the loans.

The borrower’s foremost requirement is to have property documents with clear titles, thus enabling the lenders to process the loan to the lender. As per the RBI directives, the interest rates being charged to the lenders should be in a stipulated range only. There is just kind of minor fluctuations in the interest rates being assigned to the borrowers. Still, it is always recommended that the borrower checks for the interest rates before applying for the loans by comparing the interest rates on the bank’s website. The borrower’s CIBIL ratings may not matter so much as the property documents are already being mortgaged to the lender, thus creating a surety to the lender against the recovery. Also, there are one more significant criteria that the lender needs to follow is that the property should not be a disputed one, or based on an illegal encroachment land, or an un-occupied or dilapidated building. Also, there should not be any existing loans running on the current property that need to be mortgaged.

Guidelines to be followed for the loan against the property:

• Property should be with clear titles:

The borrower should have a property with clear titles to avail the loans against the property. The borrower should not have property being mortgaged in any dilapidated building, illegal encroachment land, unoccupied building, un-authorized construction ones. The flat should not have any co-owner as it can result in disputes amongst the property, making it difficult for the lender to sell the assets and complete the property’s recovery. The borrower should have the property with proper documents, clear titles & preferably property been available in good condition, which can be readily saleable. Also, the property is based in a prime locality can be given higher preference by the lender to extend loans as it is easy to monetize assets rather than the property found in the outskirts.

• Interest rates being chargeable & other clauses:

The borrower should keep the check on the interest rates being charged to the borrower. The borrower should compare the interest rates being charged by other leading financial institutions and try to negotiate the interest rates being charged by the banks or opt for the competitor’s loans. The other guidelines are related to the banks’ processing fees, penalties being charged in case of delay in payments, and the due date by which the borrower is expected to pay the installments to the banks. Also, all other terms & conditions should be thoroughly checked by the borrower before the loans’ processing. If the terms & conditions are mentioned in such a way that all the conditions are in favor of the lender, then the borrower should challenge the terms & conditions. For example: If the words contain the penalty would be charged against the loans’ early repayment. Then the borrower can oppose the state as the early repayment should not be penalized to the borrower. And instead, they should be encouraged to help the borrower become debt-free in an early stage.

• Moratorium of the loan:

The loan moratorium should be so that the borrower should be able to easily make the installments’ repayment. According to the need, the borrower can repay installments in a faster way to the lender to become debt-free from the loans. In another case, the borrower can opt for the higher moratorium of loan duration in order to reduce the monthly liability of installments on the borrower. Long-term debt repayment maybe sometimes be beneficial in the case of lower salaries. In comparison, as in the case of a higher wage, the loans can be repaid in a faster way to become debt-free or to even benefit from the lower repayment of interest.

Conclusion: 

The borrower should thus check the guidelines regarding the loans being applied for should check with the terms & conditions of the borrowing. The borrower should keep all documents required for processing the loans to be presented to the lender. The borrower should also request the lender to change any terms & conditions if they are objectionable, failing which the borrower can even opt for another lender.