Loans against property are a little trickier to undertake than other loans. These are some common mistakes you must avoid when determining which lender to get the loan from.

Never Make These Mistakes While Opting for Property Loan
Never Make These Mistakes While Opting for Property Loan

A loan against property is an excellent route for refinancing with the help of assets that you already own. Loans against properties are secured loans that require collateral. You pledge immovable assets such as land or property for the mortgage. In this situation, you must own the pledged property. Several people either incur additional debt through further loan sanctions or resort to liquidating some of their assets to fund high costs.

Thus, a loan against property becomes an apt way to optimise the return on investment of these properties and avail of a relatively affordable loan. Although the procedure of undertaking a loan against property is simplistic, it is only possible when you avoid these common mistakes. Additionally, ensuring your loan against property eligibility makes for an even more seamless experience.

Avoid These Mistakes While Opting for Property Loan:

  1. Not Verifying Eligibility Criteria

Compared to personal loans and other unsecured loans, the process of availing a loan against property can be lengthier. Therefore, to get approval from your lender or financial institution as soon as possible, you must ensure that you thoroughly cross-check the eligibility criteria.

Every loan has a specific set of guidelines that all borrowers must stick to. Making careful note of them improves your chances of getting your loan approved. The standard property loan eligibility parameters are:

  • Applicant must be working for:
    • An MNC
    • Privately owned company
    • Public limited companies
  • You can also pledge commercial properties for such loans.
  • You cannot put up an unused or empty plot of land for the mortgage.
  • You must own the property you want to get a loan against. It cannot be a rental.
  • You must be an Indian citizen.
  • You must meet any age requirements your lender provides.
  • You should have a stable and regular source of income.
  • You will need to have your property documentation in place for availing the loan against properties.
  • You should not have any discrepancies in your sales or title deeds since these could impact your loan and credit score in the future.
  • You should not have any repayment defaults in your credit history.
  • You need to have a pristine CIBIL score—ideally, 750 and upwards.
  • You can only mortgage a property in a major Indian city for value assurance. Lenders usually provide a list of cities that qualify for this.

The points mentioned above give a well-rounded view of the parameters. Adhering to them guarantees a speedy sanction on your application for a loan against property. Additionally, your lender also helps get you a financially viable loan when you meet the necessary criteria.

2. Overlooking Overhead Charges

Most property loans have a processing fee attached to them. The fee is usually 1% to 2% of the amount you borrow. However, many borrowers overlook this charge as it can be written in fine print. The extra amount payment can later come as a shock and destabilise your finances in the short run. This makes it essential to make sure you have that amount ready when undertaking a loan against a property.

3. Lousy Documentation

In case you desperately require funding, property loans can be comparatively lengthier to avail of. In the course of this procedure, a common mistake many borrowers make is lousy document submission. As a standard, your lender needs 2-3 weeks to process and disburse a loan against the property. Improper documentation can delay this step further.

Hence, you should have every document on hand from the very start. This is essential to avoid any possibility of rejection. These are the documents required for a loan against property:

  • For self-employed individuals:
    • Aadhar Card
    • Address proof
    • Bank statements (last 6 months)
    • Property’s documents (copy)
    • PAN Card
  • For salaried individuals:
    • Aadhar Card
    • Address proof
    • Bank statements of the last 3 months
    • Property’s documents (copy)
    • Income tax returns
    • Latest salary slips
    • PAN Card

Keep all these documents ready, and once you submit your application, the processing period will most likely not be protracted compared to the lender’s regular response time.

4. Miscalculating Loan Amount and Tenure

The loan tenure and amount are two aspects that arguably have the most influence on your loan’s affordability. Therefore, it is imperative to make sure you agree upon a loan offer with the shortest possible tenure, on the basis of your finances.

Having a lower maturing period helps you ensure that the sum you pay through interest is the lowest it can be. However, a low tenure directly means a higher EMI, which could affect your financial planning capabilities. Due to this, ensure you are financially secure enough to weather the impact of such an EMI. Only then can you agree to shorter tenures and increased EMIs.

When undertaking a loan, cover every base to ensure you disburse your debt in a timely manner. Begin your search for a financial institution or lender that can assure transparency alongside competitive interest rates. Checking these criteria improves your loan experience manifold!


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