One good way to make full use of property that you own is to take a debt consolidation loan using it as the base. For most of us, having too many small loans is a great hassle and it takes up too much time, energy and effort to simply manage them and pay them back on time month after month. Debt consolidation is a great way to address this problem and combine all the loans into a single one that is easy to track and repay without default. A mortgage loan against your property is the best way to do this. Here is how you can determine the favourable terms for such a loan that is based on your property.
Is the loan large enough to cover your needs?
The biggest reason why most people opt for a mortgage loan when they think of debt consolidation is that the property is your most valuable asset and a loan with it as collateral can give you access to substantial funds.
However, you must be extra careful about this aspect when you do your comparison shopping because all lenders do not give you the same loan to asset value proportion. Choose a lender who gives you the best options here, that is, the maximum loan to asset value percentage. Many lenders may offer a better loan to asset value if you have a very good credit history so one thing to do beforehand is to check your credit score and correct mistakes that are pulling down your rating.
Is the loan sanction process quick and simple?
Unlike loans that have no collateral, the loan against property typically is easier to get and also faster to process. The lender has a collateral to reduce his risk and so the risk assessment and verification process may not be as complex as it would be with other non-collateral loans.
However, this is not the case with all lenders. When you are looking for a loan against property, make sure to find a lender who promises speedy loan processing and sanction with the least hassle for you. This ensures you get access to the funds you need at the earliest so you can pay off other, possibly costlier loans and switch to this single, cheaper one quickly.
Is the loan against property interest rate attractive?
One of the biggest reasons why you may be taking this new loan is to enjoy a lower loan against property interest rate. Opting for debt consolidation during a low interest climate is a good move for the reason that you convert higher interest loans that require a higher pay out overall into a lower interest one with a smaller pay out. The savings you enjoy can be substantial depending on how high the interest rates are on the current individual loans.
One of the first aspects to check when you are shopping for a consolidation loan of this kind is the loan against property interest rate. Compare it with what you are paying monthly in terms of loan repayments for all your debts put together. Use an EMI calculator to help you get an accurate picture of what you are paying currently versus what you will pay with your new consolidation loan. This tells you if the new loan you are considering is worth the trouble of going through the loan sanction process. If there is only marginal savings, then you should look out for better rates from a different lender.
Can you pre-pay the loan?
One aspect that is often overlooked is prepayment of loans. When it comes to property, there may come a time when you wish to sell it and purchase a new one in a more convenient location. In such case, any dues on the property have to be paid off.
You will want to pay off the loan early and sell the property quickly but this can become a big problem if your lender has prepayment penalties applying on the loan. Check for these clauses in the loan documentation before you sign up for a mortgage loan that you will be using to consolidate your debts into a more manageable one.