How to Avail of a Lower Loan Against Property Interest Rate?

As per a recent report, the loan against property interest rate offered by some leading financial institutions of the country varies within a range starting from 8.20% per annum to 10.89% per annum for loan amounts up to Rs.20 lakh. Regarding this rate of interest, there are ways through which borrowers can lower it. But before diving into such details, it is imperative to have some more idea about LAP and its interest rate.

A loan against property is a secured loan category where borrowers or property owners involved need to pledge their property as collateral. It is also known as a mortgage loan. If an individual is in need of a high loan quantum to fund big-ticket expenses like higher education, wedding, medical emergency, or house renovation, a loan against property can prove to be a viable option. In addition to this, these loans usually come with a low rate of interest compared to unsecured financing facilities.

Following is a look at a few ways through which individuals can avail lower interest rates against their loans against property.

Tips to reduce LAP interest rates

Even after choosing the best lender offering an interest rate of their choice, individuals can take note of the below-mentioned tips to reduce their loan against property interest rate:

• Choosing a short loan tenor can prove to be helpful. A longer tenor implies bearing a higher total interest outgo and greater interest levy.
• Contributing more towards the down payment initially can reduce the loan amount, directly impacting the interest rates for LAP.
• A high credit score of more than 750 would allow a borrower to negotiate with the lender for a better LAP rate of interest.
• While making prepayments do not affect the interest rate, it can reduce the total interest outgo for the loan.

Potential borrowers looking to apply for a loan against property, must ensure to repay punctually as that would not only boost their credit scores but also allow them to reduce their interest rates for credits availed in the future. They would also become eligible for exclusive benefits extended by financial institutions.

For instance, they will be able to enjoy pre-approved offers, which will help in expediting the lending process. These offers are provided on various financial products like loans against property, home loans, and more. Individuals can check their pre-approved offer by providing a few details such as name and contact number.

Factors affecting the loan against property interest rates

Illustrated below are some factors which affect the mortgage loan interest rates:

• Credit score

A borrower’s credit score plays a crucial role when it comes to determining the rate of interest while acquiring a loan against property. Maintaining a credit score of 750 or more is usually recommended to avail of these loans at a competitive interest rate.

• Borrower’s profile

The borrower’s profile, characterized by occupation, age, monthly income, city of residence, etc., leaves an impact on the loan against property interest rate charged by a lender.

• Type of property to be mortgaged

The property loan interest rate might differ for a residential and commercial property as both of them bear a different value. Besides these, the location and the property’s age also act as determinants for the rate.

• The tenor of a loan

LAP is a long-term financial commitment wherein a borrower requires to make regular EMI payments for about 10 to 15 years. A short loan tenor implies bearing high EMIs and vice versa. Conversely, opting for a longer tenor might lead lenders to impose a higher rate of interest. One can take the help of a loan against property calculator to compute the monthly installments easily.

If you are looking for a loan against property to start your business or to finance any other big-ticket expense. Take note of the above-mentioned pointers and avail the best loan against property interest rate.