Important Do’s and Don’ts When Taking A Loan Against Property

Arranging money urgently might be a challenge for novice borrowers. However, people acquainted with a loan against property know how easy it is to avail of instant finance with such loans.

A loan against property is a collateral-based loan that provides an extended repayment term, a low interest rate, simple eligibility, minimal documentation, and a host of other benefits.

On the positive side, a loan against property, or land mortgage loan, is a no-frills loan. You can submit a few documents, and after verification, the lender transfers the loan amount to your account.

However, on the flip side, if you fail to deposit three consecutive EMIs, the lender may liquidate the property.

Hence, you must know the dos and don’ts of a land mortgage loan to reap maximum benefits from the loan. Read on to know more.

The Dos of a Loan Against Property

Analyse The Risks

Although a land mortgage loan is one of the simplest loans for availing of instant money, you should carefully evaluate the terms before applying.

Lenders set varying criteria for loan approval and loan recovery in the case of a default. For example, the minimum income criteria may widely vary between lenders.

Moreover, the liquidation process might be different from lender to lender. It is prudent to know all of these in advance to avoid confusion in the future.

Opt For a Short-Term Land Mortgage Loan

You may extend the tenure of a land mortgage loan to twenty years. Borrowers often apply for a long-term loan since it brings down the EMI amount.

However, when you opt for a long-term loan, your lender may charge a higher mortgage loan interest.

Hence, if you want to pay less as interest, it is better to apply for a short-term loan.


Compare Lenders

People availing of a land mortgage loan offline might get fewer offers than those applying online.

Online loans are a clear winner regarding the ease of application and approval and discounted mortgage loan interest rates.

As an intelligent borrower, you must compare the features of an offline loan with those available online to pick the best one.

Also, not all online lenders offer the same facilities.

Lenders like PNB Housing display all terms on their website, making it convenient for borrowers to check the loan policies before applying.

The Dont’s of a Loan Against Property

Burden Yourself With Debt

Unlike most other loans, land mortgage loan approval depends more on the property valuation than the borrower’s income.

You can avail of a loan amount of up to 60% of the property value.

However, you need to choose an amount that will not burden you in the coming days. It is better to analyse the debt-to-income ratio before arriving at the right figure.

Defer EMI Payments

Repaying the EMI on time is crucial for a healthy financial future. When a borrower defaults, their credit score tumbles.

Moreover, the lender may send them a legal notice. Additionally, the borrower may find it difficult to apply for a new loan in the future.

Hence, try creating a corpus while applying for the land mortgage loan. The corpus can take care of the repayments during a financial crisis.

Ignore The Tax Benefits

A land mortgage loan allows you to claim tax benefits under two sections of the Income Tax Act. Section 37(1) and Section 24(B) enable you to save taxes if you spend the loan amount for business purposes and house construction, respectively.


Knowledge about the dos and don’ts of a land mortgage loan can enable you to save more. Check all terms before applying for the loan, though.

Kamal Joshi
written by: Kamal Joshi
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