A loan against property is a secured loan where borrowers or property owners pledge their commercial or residential properties as collateral. The interest rate on loans against property is much lower than unsecured financing options such as personal loans as a secured credit form.
However, potential borrowers looking for the best loan against property interest rates must meet the set eligibility criteria and the factors influencing it.
Ways to avail the best loan against property interest rates
Individuals looking for the best loan against property interest rates can consider the below-mentioned factors:
- Maintain a high credit score
A borrower’s credit score plays a vital role in determining the applicable rate of interest while acquiring a loan against property. It is recommended that one’s CIBIL score be 750 or higher to secure competitive interest rates. Such applicants are considered low-risk borrowers; lenders offer lower interest rates along with customised offers.
- Profile of the borrower
The borrower’s profile is taken into consideration while sanctioning a loan against property.
Income and debt-to-income ratio is also evaluated during the process. Individuals with a high income and low debt-to-income ratio will be able to avail affordable interest rates.
One’s age, city of residence, employment status etc., also leave an impact on the property loan interest rates charged by a lender.
For example, a young salaried individual will be able to avail better LAP interest rates due to their workable years.
- Opt for a suitable tenor
A LAP is a long-term financial commitment. It comes with an extended repayment tenor of up to 20 years. However, opting for a longer tenor increases the overall borrowing cost significantly.
On the other hand, a short loan tenor signifies higher EMIs, but one can make considerable savings. Therefore, it is always recommended to use a LAP EMI calculator to easily compute monthly instalments and the total payable amount at the end of the tenor. This way, one can make an informed decision.
- Type of property mortgaged
The loan against property interest rates may differ for residential and commercial properties as both may hold different values. Moreover, the location and the property’s age are determinants as well. For instance, a property located at a prime location with strong communication and basic amenities such as markets, hospitals will hold a significant value for the lender.
Applicants with such properties can convince their lenders of affordable interest rates.
How to avail a loan against property?
To get the lowest interest rate, individuals must follow these steps:
Step 1: On the lender’s official website, fill up the application form with essential details.
Step 2: Wait for the company’s representatives to contact you, i.e., usually within 24 hours.
Step 3: Receive an approval confirmation email or call in minimum time.
Step 4: Finally, submit the documents required for a loan against property.
Get the entire sanctioned amount credited to your account directly at the earliest.
Tips that can help reduce LAP interest rate
Individuals must select a suitable lender after taking into account the interest rate offered by them. Nevertheless, one can follow these tips to enjoy a reduced LAP:
- A short tenor is rather helpful, whereas a longer toner will imply paying a higher interest outgo.
- A credit score of 750 or more will be beneficial and can help individuals negotiate with lenders for a lower LAP.
- It is best to make prepayments regularly as that plays a major role in reducing the interest rate for the borrower.
- One can also choose to make down payments in the initial period to directly reduce the loan payment amount.
- Meet the eligibility criteria and submit the required list of essential documents
- One can also opt for a balance transfer and save significantly. For this, one can use a loan against property calculator and compute the EMIs offered by the new and existing lenders.
Financial institutions also provide pre-approved offers, which simplify and accelerate the loan process. These offers are provided on various financial products like home loans, loans against property, and more. Borrowers can check their pre-approved offers by providing essential details, such as their name and contact number.
Hence, borrowers must know all about a loan against property to avail it without any difficulty. They should take note of the above-mentioned points to enjoy lower loan against property interest rates.