The lending industry in India is growing by leaps and bounds so that a borrower has a plethora of options to choose from, in case he/she has decided to borrow funds. When it comes to loans, there are two major classifications, secured and unsecured. Secured loans involve pledging on collaterals, and unsecured loans do not include the same. Thus the interest on secured loans is comparatively lower as the lenders have the asset pledged by the borrowers. One of the prominent types of secured loans is a loan against property.
Most of the people opt for the property loan after personal loan. These loans are safe and borrowers can easily get the loan amount as if and only if they own a property like, plot, residential property, land or commercial property. It is easy to asset their own property for getting the loan.
Loan against Property or LAP
Most of the people are familiar with the term “LAP”. A loan against property is a type of loan where the borrower pledges his/her property to claim funds from the lender. The loan against property eligibility typically depends on various factors like credit score, property value, documents submitted, and much more. However, you should know that there may be instances in which you might be subjected to loan against property frauds. Because these types of frauds are common and borrowers which are unknown of it can easily get trapped into it. Below are a few ways by which you can guard against such scams. Always check each and every information if you are going to avail for property loan so that you may not get trapped.
Tips To Safeguard Yourself From Frauds Of Property Loan:
● Protecting your information
During the loan tenure, your bank/NBFC would be possessing your property documents, and you must choose a registered lender who can protect your property information and does not indulge in sales/leasing out of your property without intimating you. Also, a reliable lender would be particular about loans against property documents required by them and would not ask for more information. The common documents are recent photographs, ID proof, address proof, ITR, property papers, Age proof etc. If the lender asked more documents other than these it means LAP fraud because only these are the required & basic documents.
● Being in touch with your lender
If you ever face difficulty with your repayment phase, it is always better to inform your bank/NBFC so that they can decide about providing some exceptions if it’s applicable as per existing terms and conditions. The lenders usually offer a 90-day notice period before claiming your asset as a non-performing asset(NPA) and another 30-day before putting up a notice about auctioning the property. Such an action would help you to buy time to plan your repayment phase in the interim. If you feel that your lender is not following the protocol, you have the right to take this up with your lending institution. If your lender talks about auctioning your property in a shorter duration, it can be considered as LAP fraud. Hence, always beware in such a case.
● Getting your fair share
In the unfortunate circumstances, where your property will be auctioned, your lender can only claim the debt amount and not the total property value. In such a scenario, you can claim the remaining funds and invest in other sources to build a better portfolio. In case your property has a higher LTV (Loan to Value) ratio based on several parameters like land location, nearby amenities, etc., your plot will have a better chance to be sold all together.
Assuming that your final 30-day notice period has passed, if your lender puts up a notice about auctioning off your property, you have the right to know about the value in which the property would be sold. If the cost is too low, you can bring a prospective buyer to the financial institution and sell the property at a better value so that you can ease out your financial burden. Either way, transparent communication is vital in such scenarios.
● Knowing your rights
You have both the human rights and the right to be heard in scenarios where you are unable to repay the loan amount. The lender should respect your privacy while contacting you about your repayment. You can also ask necessary questions about your repayment phase to your lender.
While your loan against property eligibility can depend on various factors like, credit rating, source of income, property you own, documentation of property, ITR and much more. You also need to plan your repayment phase well in advance so that you do not face issues later. Always check the loan against property interest rates of different lenders which offer the same service in order to get the best one.