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Shopping for a Loan Against Property? Avoid these Costly Mistakes

Among the many loans that are related to Real Estate India, the widely used loan against property is a familiar name.

Houses on Coins - depicting Loans Against Property

A loan against property (LAP) is a flexible financial tool that enables people to borrow money for a range of personal and commercial requirements by using the value of their property as collateral. This secured loan option often comes with lower interest rates than unsecured loans, making it an attractive choice for borrowers.

However, one must avoid inevitable common mistakes to make the most of a loan against property and prevent it from becoming expensive. This article will explore the top five potential pitfalls and how to avoid them while considering a loan against property.

1.     Comparing Interest Rates

Interest rate is a pivotal factor that directly influences any loan’s monthly Equated Instalments (EMIs), including a loan against property. The interest rates given by various lenders must be carefully compared before starting the loan application process.

In today’s digital age, most lenders have official websites that transparently display their interest rates. By researching and comparing these rates, borrowers can identify the most competitive option that aligns with their financial requirements. Whether you’re eyeing a home loan interest rate or exploring financing options from a home loan finance company, diligent comparison can save you money in the long run.

2.     Processing Fees and Prepayment Charges

A crucial aspect often overlooked by many borrowers is the processing fee associated with the loan. Given that a loan against property usually involves substantial amounts, even a slightly higher processing fee can contribute significantly to the overall cost of borrowing.

Similarly, borrowers must also consider prepayment charges. These prepayment charges are imposed if one pays the loan before the predefined tenure.

Being uninformed about these fees can lead to unwelcome surprises down the line. Therefore, factoring in processing fees and prepayment charges is essential while evaluating different loan options.

3.     Optimal Loan Tenure

Selecting a suitable loan tenure can significantly impact your monthly EMIs. A longer term reduces the EMI amount but increases the total interest payout over the loan’s duration. On the other hand, a shorter tenure raises EMIs while lowering the interest expense. Finding the correct mix is essential to keeping EMIs reasonable without sacrificing other financial objectives.

Borrowers should choose an assignment that fits their financial capability and goals, whether considering a house loan interest rate or reviewing terms from a home loan finance firm.

Infographic design - how to avoid expensive mistakes when availing loan against property

4.     Timely Disbursal

The disbursal time, or the time taken to approve and disburse the loan amount, is a critical consideration for borrowers requiring urgent funds. Different lenders have varying disbursal times, depending on their evaluation processes. When time is of the essence, opting for a lender capable of expedited disbursal is vital.

This evaluation process necessitates having all the necessary documents ready and adhering to the eligibility criteria outlined by the lender. Researching the lender’s website and communicating directly with their representatives can help accelerate the loan approval process.

5.     Consider Existing Liabilities

Assessing your existing financial commitments is imperative before committing to a loan against property. Lenders gauge the debt-to-income ratio to determine your ability to repay borrowed funds promptly. If you are already servicing high-value loans, it’s prudent to opt for a loan amount that comfortably aligns with your repayment capacity.

Always look for the most beneficial terms and circumstances, such as low interest rates on house loans. In addition, it is crucial to keep a high credit score. While a poor credit score may not entirely disqualify you, it could lead to stringent terms and higher interest rates.

Additional Tip: Study the Terms and Conditions

Neglecting the fine print can be a costly mistake in the long run. The terms and conditions of a loan against property encompass various aspects, including hidden charges and specific clauses. To avoid unpleasant surprises, borrowers should meticulously review and comprehend these terms before signing the agreement.

In case the financial jargon appears overwhelming, seeking professional guidance can provide clarity. Moreover, if any clauses remain unclear, don’t hesitate to seek clarification from the lender. This guarantees that you are entirely aware of the rules regulating your loan and have adequate knowledge to make wise choices.


If you have properties in Gurgaon or other cities, borrowing money against them can be wise move to access additional funds. And there is no doubt that a loan against property presents a promising avenue to fulfil personal and business financial needs. However, avoiding potential mistakes is pivotal to preventing this secured mode of finance from becoming expensive.

Borrowers may confidently traverse the loan by comparing interest rates, accounting for processing costs and prepayment penalties, selecting an ideal tenure, considering disbursal time, reviewing current liabilities, and comprehending terms and conditions.

Whether you’re searching for competitive home loan interest rates or exploring options from a reputable home loan finance company, informed decisions will pave the way for a financially sound borrowing experience.

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