Top Factors That Decide Your Loan Against Property Interest Rates

3 min read

A loan against property is one of the most widely opted loans in India. Much of its popularity stems from the fact that it serves multiple purposes. It means that you can use the sanctioned loan amount for whatever purpose you want. You will need to pledge your property as collateral with your lender to get a loan against prosperity.

It enables you to secure a loan amount based on your property’s market value. Most lenders offer up to 80% of the property’s value as a loan. Compared to other loans like home renovation loan , the loan against property interest rates is low. However, your interest rate depends on factors like your property age, income, credit score, current financial obligations, etc.

The best part is that you can use a loan against a property calculator to determine how much you can afford to pay every month in EMIs.

Here are the factors that affect your loan against property interest:

Credit score

Your credit score is one of the factors that influence not only the loan against property interest rate but even your loan eligibility. It is a three-digit number that lenders check before approving your application. It indicates whether or not you are a credit-worthy person. The minimum CIBIL score required to apply for a LAP loan is 750.

If you have a credit score below 750, you will struggle to get a loan against your property. Even if you do get a loan, you will have to incur higher interest rates.

Applicant profile

Another factor that affects your loan against property interest rate is your financial profile. The interest rate depends on factors, such as age, nature of employment (Whether you are a salaried employee or a self-employed person), residential address, monthly income, etc.

To secure a lower interest rate, you will have to convince your lender that you have a regular income. Keep in mind that the higher your income, the better your chances of securing a lower interest rate. As a salaried individual, you can get a better interest rate deal as you have a fixed income as compared to a self-employed person.

Type of property

Before approving your loan application, the lender will check the type of property you are seeking a loan against. Your lender will consider the location, age, and condition of your property. It helps them in evaluating the loan amount along with the interest rate. Your loan against property interest rate also depends on whether you have a residential or commercial property. Having a high-value property in a prime location specified by the lender can fetch you a lower interest rate.

Loan tenure

The loan tenure has a direct impact on the loan against the property interest rate. Loan against property’s repayment tenure ranges between 10 to 20 years. It requires you to repay in equated monthly instalments (EMIs). If you choose a longer loan tenure, your EMI amount will drop significantly, but you will pay higher interest in the long run. However, if you apply for a shorter loan tenure, your EMI amount may increase, but you will save significantly on the interest rate and get rid of the financial burden sooner.

While choosing your loan tenure, make sure to assess your affordability and choose a loan tenure that best suits your requirements. You can use an online loan against property calculator to determine your EMI based on your interest rate, loan amount, and loan tenure.