5 Things Must To Be Consider While Prepaying Your Loan Against Property
The loan against property (LAP) is one of the handy solutions to opt for if you want to accumulate a considerable amount.
The loan, in this case, is given on the Loan to Value (LTV) of the mortgaged property. And that’s what makes it secured to help you access lower property loan interest rate.
It also means that you can enjoy paying reduced EMIs and manage your expenses better.
If you have the required mortgage loan eligibility, then you can borrow an amount running in crores.
Another vital point of the property loan is that you can repay the borrowed amount over a flexible repayment tenure ranging 2-20 years.
Many borrowers make prepayments during the property loan repayment tenure. It helps them reduce the loan against property interest rate + EMI amount.
It helps them in reducing the overall cost of their ongoing loan against property.
But while you go ahead and start prepaying the loan against property, you need to consider a few aspects. Read on and know more!
- Evaluate the cost of making the prepayment
The first thing to do is evaluating the cost of making the prepayment. It is because many lenders charge some amount if you make some prepayments during the tenure. Hence, you must do that before you apply for the property loan in advance. It can make you confident of an amount that you will pay as the prepayment. The charges of the prepayment are mentioned on the website of the lender you apply for. Many leading online lenders these days don’t charge any amount if you make prepayments.
- Don’t touch your contingency fund for prepayments
Always be informed to know that a contingency fund is for helping you manage the needs for any unforeseen situation. And you should always ensure to avoid touching the funds kept for contingency. Using the contingency fund for prepaying the loan means that the purpose of it will be broken. Thus, if you have a well-stocked emergency fund, then you should not use it for making prepayments.
- Never liquidate your assets and savings for making a prepayment
Another thing that you should consider while making a prepayment for the loan against property is not liquidating your savings and assets. It will not only break your term deposits like fixed deposits and mutual funds but mark the purpose of having it.
- Go for the balance transfer facility while prepaying
If your lender is charging an amount for making a prepayment, then you should calculate the cost. If it is more, then you can also opt for the balance transfer. But while doing that, you should check the processing charges of it. If it is less than the charges for prepayment, then you should do that. What’s more, you can also avail a top up loan while making the balance transfer and use it to prepay the ongoing property loan.
- Consider using your increased salary amount for extra payments
Every year, Salaried professionals receive a hike in their income. Hence, you can use the increased income to make prepayments. Even if you are able to reduce the EMI + interest amount by bit, then it may help you reduce the tenure. Now, consider doing that for some years, and you will have your property loan EMI + interest reduced. Thus, whenever you receive an increment and bonus, then you can use the figure to make way for some prepayments.
When you have an ongoing loan against property account, then it means having the debt on your shoulders.
By considering the discussed prepayment factors, you can help yourself minimize the debt burden and pay off the outstanding loan amount easily.