How to avail lower loan against property interest rate?

Consumers look for a loan against property (LAP) when they require sizeable funds. Due to their secured nature, these loans have low interest rates, making them affordable for borrowers. 

Financial institutions do not offer the same interest rates for everyone. The asset’s value plays a major role in determining the loan amount and interest as it provides security for the lender. Generally, the lower the lender’s risk reasonable is the loan against property interest rate. Besides property value, there’re certain other factors playing a key role in determining the interest rates. 

The following sections will explain how one can avail the best loan against property interest rate. 

Tips to get better interest rates for a loan against property

The following factors allow you to improve loan against property eligibility:

  1. Age- Most financial institutions have a minimum and maximum age limit to ensure that you have a steady income source and can repay the loan before retirement. You cannot extend the tenor of your loan beyond a maximum of 55-65 years.
  2. Income- Borrower should be either a salaried employee or self-employed with sufficient and steady income. They will need to furnish their latest salary slip or bank account statement as proof of their income. 
  3. Joint application: If a borrower has a low credit score or cannot get a higher LTV, they can apply for loan against property with a co-applicant with better financial history. 
  4. Documentations- The borrower must have all the required documents proving their ownership of the property. Having all the following documents will make it easy to get a mortgage loan. 
  • Identity proof
  • Address proof
  • Property documents
  • Proof of employment
  • Income proof

Balance transfer 

Moreover, existing borrowers with high interest rates can get out of the debt trap with a loan against property balance transfer. With this facility, individuals can transfer their outstanding loan amount to another lender and repay it with lower interest rates and better terms. However, in such cases, also one needs to have a spotless repayment history. 

Besides these methods, you should also consider the factors that impact LAP interest rates. 

Factors influencing the loan against property interest rate

  • Applicant’s profile

 The lending institution will thoroughly check the applicant’s profile before deciding on interest rates. They will consider factors like the applicant’s age, residence, monthly income, employment status etc., to decide on the rates. 

  •  CIBIL score

If you have a low CIBIL score, lenders might consider you a high-risk borrower and charge higher interest rates. Having a CIBIL score or 750 or more will make it easy for you to get competitive rates. 

  • Property value

A high property value will determine the interest rates charged for your mortgage loan. The location, age, condition and type of property influence the valuation of a given property. A high-value property in pristine condition in a prime location will get the lowest interest rates.

  • Type of property

The type of property you mortgage can affect the interest rates. For example, residential properties generally fetch lower interest rates as they are more valuable. However, different types of loan against property will carry different LTV (loan to value) and interest rates. 

  • Tenor

Longer is the duration of your loan, the lower will be its interest rate. On the other hand, a shorter tenor will carry higher interest rates and, therefore, higher EMI. You can use a loan against property EMI calculator to find the ideal tenor. 

It’s a good idea to carefully research the loan against property interest rate before opting for one. 

Moreover, selected HFCs also offer pre-approved offers to individuals with higher eligibility criteria. Financial institutions offer these for various financial products such as home loans, loans against property. Such offers save time and hasten loan processing. You can check if you qualify for a pre-approved offer with just your contact information and name. 

A loan against property offers competitive interest rates, making them an ideal option for emergency funds. The above are a few effective ways borrowers can secure a better loan against property interest rate, making repayment easier and affordable.