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5 Rules to Follow While Taking a Loan Against Property in India

When it comes to borrowing funds in any form, it is imperative to make informed decisions to ensure a fruitful experience. This includes knowledge about the particulars of the loan and understanding the fine print, and is especially true in the case of a loan against property, simply because of the stakes involved.

Since it is a secured loan that requires you to pledge property as collateral, you need to employ caution when opting for this loan. Let your financial wellbeing be the focus and you’ll surely be able to avoid pitfalls.

However, if you’re unsure about the approach you should take in order to apply for a loan against property in India, here are the 5 rules that you can follow.

Compare Lenders and Loan Against Property Offers

Before you zero in a loan, ensure that you’ve researched the market thoroughly. Remember, a loan against property is a long-term financial obligation and you will be making repayments towards it for at least a decade. Hence, pick a lender with care. This will help you crack a deal that suits your needs and repayment capabilities perfectly. To this effect, look at more than the loan against property interest rates and pay attention to the tenor as well as charges on prepayment and foreclosure. Pick a lender after weighing these factors to get a feature-rich, cost-effective loan.

Maintain a healthy credit score

An imperative element to any application is your credit score, as it a direct indicator of your creditworthiness. Generally, you should maintain a credit score over 750 to successfully apply for a loan against property. Any lesser and you relinquish negotiation power and may face rejection or higher interest rates.

Do not over-borrow against your asset

It is important to know exactly how much funding you need. Generally, if you pledge a high-value asset, you will be allowed to get a sizeable sanction, around 70% of your asset’s value. However, exercise restraint and borrow only as much as you need. Over-leveraging your asset puts it at greater risk, as your EMIs will be higher and repayment will be costlier.

Opt for suitable EMIs

When opting for a loan against property, you can negotiate with your lender on the tenor for repayment. A longer tenor translates to more affordable EMIs and you should always prioritize affordability. While you may end up paying more as interest, it is far better than putting yourself under financial duress for the entire tenor. The latter may also lead to defaults and could cost you significantly more.

Additional Read: How to Avail Higher Education Loan?

Get Insurance when Availing of a Loan Against Property

Getting term insurance whenever you take a large loan is a must. It safeguards your dependents and offers them financial security in the unfortunate circumstance of your demise. Without insurance, the lender will confiscate your asset and this could severely affect your dependents.

Apart from these 5 rules, to truly have the best borrowing experience, opt for a lender that prioritizes this. Bajaj Finserv’s Loan Against Property is one such option that not only gives you a hefty sanction of up to Rs.3.5 crore but also offers other lucrative features.

For instance, you can avail of the doorstep service and Flexi facility. The former allows you to complete application processes from the convenience of your home along with a representative, while the latter allows you to borrow from your sanction multiple times, in parts. Here you are only charged interest on the amount you utilize and not on your entire sanction.



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