Top Factors which Decide Your Loan Against Property Interest Rates

Customised property loans are available for individuals looking for a large amount of money to achieve their goals that demand a significant amount of money. A loan against property (LAP) is a secured loan with the lending institutions. If an individual pledges a residential property, the loan amount can be 60% of the property value with renowned non-banking finance companies (NBFCs) and can go as high as 70% if a commercial property is pledged. The ownership of your property will remain with you only. In case it is challenging to repay your loan, you have the authority to sell your pledged property to settle the loan.

If you are interested in availing of such a beneficial secured financing option, you should be fully informed about various factors affecting a LAP loan interest rate. This post elaborates on important aspects concerning property loan interest rates.

What Factors Decide Property Loan Interest Rates

  1. Applicant’s Profile 

The major deciding factor for loan interest rates includes your profile – your age, employment status or income status, employer, resident, monthly income, etc. All these impact the property loan interest. For example, individuals near their retirement will get a loan at a higher interest rate than young applicants. Similarly, a salaried individual can get a loan at a lower interest rate due to their fixed salary that can make timely EMI payments. In contrast, self-employed applicants may get a loan at a higher interest rate.

  • Loan Tenure

Another influential factor for loan interest rates is the duration of tenure. There may be a higher interest rate for shorter-term loans than long term loans. A borrower needs to consider that the shorter the loan tenure, the higher will be the EMI. Since property loans are long-term commitments, an individual looking for a loan against property should use a loan EMI calculator and identify the EMIs for different loan tenures. You need to ensure that you can pay a fixed EMI (Principal loan amount + interest) every month without any delay or burden. 

  • The Type of Property to be Pledged

Lenders consider the type of property to be collateralized while offering an interest rate on your loan against the property. They look at your property’s location, age, and condition. Commercial properties and residential properties bear different interest rates to provide a loan. If you are an owner of commercial property in a prime location and maintain it in a top-notch condition, you can get a high loan amount at a lower interest rate than those that are too old.

  • Credit Score

A credit score is an important eligibility criterion for every lending institution. It impacts the loan interest rates hugely. A lender requires a credit score of 700+ to offer you a loan at competitive interest rates. If it is low, you will be a high-risk borrower for lenders, and it may offer a loan at a higher interest rate comparatively. The lender can even decline a loan application with a low-interest rate.

Eligibility Conditions for Loans Against Property 

The eligibility for a property loan differs for salaried individuals, self-employed and business persons. 

  • Age 

For Salaried:  21-60 years

Self-employed: 25-65  years

SME (Small and Medium Enterprises) – at least two years old 

  • Credibility 

For Salaried and self-employed:  A score of 700+ 

SME – Financial records audited by a CA showing steady profits over the past two years. 

  • Documents Required 

For Salaried  and self-employed

ITR for the last two years 

Bank statements for last six months

KYC documents

Form 16

Property documents

For SME 

For SME: 

KYC Documents

Income statements 

Bank Statements

Income Tax Returns for minimum past two years

Form 16

Property Documents

Attractive Features of Loan Against Property with NBFCs 

One can look for a lender offering unmatched property loans with the following features: 

  • A high loan amount can go up to 5 crores to fulfil your personal or business requirements.
  • Easy interest rates start at as low as 9% to maximise the benefits for a borrower.  
  • A seamless and transparent process that promises fast loan disbursal. 
  • Customised financing option to suit individual needs at different life stages.
  • Minimal Documentation and hassle-free online application: A loan experience should be smooth from start to finish. Choose one that offers an online application to complete the loan processing.

You can use the LTV calculator provided by the lending institutions on their official websites to get an estimate of the loan value and interest rates applied to your loan against property.

Also Read: Types Of UPS Systems and How to Choose the Correct System

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