Property loans or loans against property are loans availed of by pledging a residential or commercial property or a piece of land as collateral. Once a borrower pledges the property as collateral, the lender places a lien on the property. This lien stays through the tenor of the loan. Once the borrower has repaid the loan completely, they can get the lien removed from the property.
Loans against property borrowers must borrow carefully. They must assess their repayment capacity and also use the loan against property EMI calculator to calculate their loan EMIs beforehand. Doing this will help them figure out the best combination of loan tenor and loan value for them. Property loan borrowers must also try their best to avail themselves of the lowest property loan interest rates. Low property interest rates directly translate into low EMIs as well as reduced total interest payout on one's loan. Thus, the lower the property interest rate that one gets, the easier it becomes for the borrower to repay their loan.
So, here are some simple tips on what borrowers can do to avail themselves of the lowest interest rate they can get on their loan against property.
- To start with, keep in mind that though property loans are secured in nature, your income and job stability will play a key role in helping a lender decide the rate of interest you should get on your loan. Individuals with stable jobs and income rarely default on loan repayment and therefore, lenders extend their best loan deal to such individuals. On the other hand, individuals who change jobs frequently or do not have a stable income find it difficult to get approved for a loan.
- Your credit score will matter too. Having a CIBIL score of 750 or above will help you easily convince your lender of your creditworthiness and ability to repay loans on time. Thus, if your credit score is 750 or above, it will become quite easy for you to avail yourself of low property loan interest rates.
- The quality of the collateral matters a lot. Individuals who pledge high-quality collaterals with high resale value, such as flats located in upscale societies or centrally-located homes, reduce the risk for the lender and therefore, get beneficial loan terms and conditions, such as low property loan interest rates and higher loan sanctions. On the other hand, individuals who pledge low-quality collaterals, such as properties located on the outskirts or old properties that are in dire need of renovation, find themselves repaying their loan at high property loan interest rates.
- Keeping your LTV ratio low will also help you avail yourself of a low loan against a property interest rate. The LTV ratio is the ratio of loans availed of with respect to the current market value of the pledged property. Low LTV ratio loans favour lenders and therefore, it is not surprising that lenders charge a low rate of interest on low LTV ratio loans and a high rate of interest on high LTV ratio loans.
Keeping these simple things in mind will help you avail yourself of a low loan against property interest rates and other beneficial loan terms and conditions.
