Are you paying your LAP on time ?

Financial setbacks comes always unannounced and at the wrong time when a person is the least prepared. Most of us do prepare yourself for such uninvited guests (financial emergency) from the time we start earning money. Many of us might not have set such funds due to which we may have to go to a lender to borrow money. Considering this situation almost every lender is offering different types of loans. In India, you can avail a home loan, personal loan, gold loan, loan against property, car loan and many more. In the time of crisis loan against property, which is also called mortgage loan is a prudent option.

What is a Loan against property?

Loan against property is a secured loan, meaning that a borrower has to keep the property as collateral with the bank to avail the loan. The LAP can be funded for business-related purposes, medical emergencies, to fund a child’s education, weddings or any other personal needs. Since it is a secured loan a borrower can get a higher loan amount and for a longer tenure. But it is important to pay a loan against property on time because if the loan is not paid on time then the bank will send you official notice for the first 90 days if the loan is not paid, then the bank will auction the property which is kept as collateral. Here are a few ways which will help you pay loan against property on time:-

Eligibility criteria for loan against property

The eligibility criteria for every bank is different but here is a general criterion which almost every bank follows:-

• Select a scheme which does not charge foreclosure charges: Doing proper research is an important step before applying for a loan of any type. So, when you go to buy a mortgage loan it is important that you do thorough research about the rates, fees and terms and conditions. Select a lender on the basis of these parameters and if all the parameters are as per your need then you should go to with next step. To repay the loan time or before the time you should go with a lender who does not have any foreclosure charges as this can be a game-changer. If you pay back the loan amount before time then you can save some money on EMI payments. 

• You need to prepare a budget: Once you take a loan against property it is necessary that you follow a budget and only spend money on essentials. Till the time your loan is paid off, you should only consider paying EMIs as your first priority. Prepare a budget for yourself to save yourself from debt trap and stress as well. Be wise enough to make spending decisions. 

• Do not take any more credit: Hold the temptation to buy other luxurious things due to which you might have to take another loan or credit for short term or long term. Do understand the difference between the need and desire, if a person understands the difference then he/she will be debt-free, if not then may end up in debt trap. Paying two-three EMI is never a good option and it can also reduce your credit score. 

• Choose auto-debit for EMI payments: There is no denying in the fact that a person can forget a few things but forgetting about EMIs may land you into a problem. To save yourself from such a problem you should select the auto-debit option for paying EMIs. This way you can also save late payment charges.  

• Create an investment plan: To pay off the mortgage loan on time you must create an investment plan which earns higher returns for a long term as saving alone will help pay the loan on or before time.  

• Keep a check on interest rate: Even after you have availed the loan and have started paying the EMIs, you should keep a check on the interest rate on mortgage loans. Banks keep on changing the interest rate on loans from time to time, so in case any lender is providing a lower interest rate then you can switch the loan to that lender. However, before taking a decision do consider the penalty charges, processing fees on new loan etc. If penalty charges and processing fees is low then you can save the money. 

Bottom line: Paying the loan on time or before time is beneficial because it makes debt-free soon and it also helps in improving the credit score. Following these steps can help you make EMI payments on time.