Owning property has many benefits. They are not only an effective way to increase your financial security, but during an absolute financial emergency, properties can be sold off for arranging funds to deal with the financial crunch. If one does not want to sell off a property, it can be pledged for securing a loan against property.
The market value of the property plays a role in determining the loan offer you will receive from the bank. Another factor that plays a critical role in the decision-making process of loans against properties is the income of the applicant. Banks evaluate the income sources of the applicant to assess the risk attached to the loan. If you have a reasonable monthly income, banks treat you as a less risky customer because you have the capacity to pay the loan against property EMI as per the loan amortization schedule.
Tips On How to Get Lower Loan Against Property
Loan against property is a long-duration loan, available for up to 15 years, and comes with various features. To receive the best out of a loan against property, you must strive for getting the loan on a low interest rate. A reduced loan against property rate can wonderfully boost your repayment capability. Here are some factors that have a direct impact on the interest rate of a loan against property:
1.Relationship with the bank
A good and long-term relationship with the bank can work in your favour. Lenders tend to offer better loan terms to their long-existing customers. However, this will happen only if you have built a good relationship with them, by making frequent financial transactions, paying off debts on time, using their financial products, and so on. Based on your financial transactions, banks know your financial behaviour, which help them in assessing the risk involved. If they see you as a low-risk customer, they will offer you a good deal.
2. Credit history of the borrower
Apart from affecting your eligibility for property loan, your credit score also considerably influences the interest rate on the loan. By looking at the credit score of the individual, lenders evaluate the chances of loan default on the loan. If you have an excellent record of paying your loans and debts on time, your credit score must be above 750, which is considered a high credit score. This communicates your financial integrity and discipline and therefore, lenders will offer you a lower loan against property interest rate. However, if your credit score is on the lower side, your application for property will either be rejected or you will be offered an extremely high interest rate, a tactic used by lenders to mitigate the risk on property loan.
3. Tenor of the loan
For availing of a lower loan against property interest rate, you must cleverly choose the loan repayment tenor. If you choose a shorter loan tenor, lenders may levy a higher interest rate on the loan. LAP EMI amount becomes bigger in the case of a shorter tenor, increasing the chances of default on the EMI payment. Hence, carry out all the calculations and choose a tenor that can guarantee you a reduced interest rate.
4. Profile of the borrower
All the following factors affect the interest rate on LAP – age, income, job, profession, residence. These factors bring in either certainty or uncertainty in terms of whether the borrower will be able to repay the loan in time or not. Banks trust individuals with a high income to pay the loan EMI on time. Similarly, they also prefer a borrower with a steady job.
5. Condition of the property
Because under LAP, a property is pledged to avail of a loan, lenders look at the condition of the property and this plays a vital role in deciding the interest rate. Properties situated at prime locations are easy to liquidate for the banks in cases of loan default. Also, new properties or properties that are in good conditions have better market value. If these types of properties are offered as collateral, lenders may consider reducing the loan interest rate.
Conclusion
A LAP can be availed of by pledging both a residential and commercial property. If you are pledging a commercial property, lenders may take more interest in your loan application, primarily because liquidating the property will not be a complex task for the lender if you default on the loan. You can use commercial property loan calculator to perform calculations and see the impact of interest rate difference on the loan. Moreover, commercial property loan calculator can also be used to get the loan amortization schedule.
LAP advances give you the opportunity to make high-esteem ventures at lower financing costs, going with them the well known credit decision among all. You can get a powerful approval of up to 5 crores in view of your property estimation and qualification, and reimburse it at an adaptable residency. Not at all like individual credits, LAP advances can be reimbursed between 12 – 180 months, consequently permitting you to get a huge sum with a sensible EMI which can fit reasonably affordable for you.
The decision to charge a particular rate of interest on LAP is principally related to risk. Lenders thoroughly assess the risk factor to decide whether to charge a higher interest rate or offer a reduced interest rate on loan against property. You must plan well to convey and convince the lender that you are either a risk-free loan borrower or a low-risk borrower. This method can fetch you a reasonable cheaper interest rate on the loan.
