When planning to avail a property loan, prospective borrowers can approach various recognised financial institutions for competitive interest rates. However, the applicable interest rate will depend on the lender and risk evaluation of the borrower’s credit profile.
Read ahead to learn more about it.
Factors influencing the loan against property interest rate
Borrowing property loan in India allows borrowers to fulfil varied personal and professional requirements. Moreover, due to its secured nature, the attractive interest rate makes the repayment structure reasonable, thereby allowing borrowers to make considerable savings on interest payments.
In addition to that, there are certain factors influencing interest rate on a loan against property that potential borrowers must know, and they are discussed below:
- Value of property
When planning to avail a property loan, prospective borrowers must know that the interest rate of LAP depends on the mortgaged property’s current market valuation. Usually, residential properties hold considerable value in the market.
Hence, mortgaging such properties ensures a high loan quantum. For instance, property situated in a prominent location and surrounded by essential amenities will hold a higher value. Moreover, applicants using such properties as collateral can convince a lender to levy a reasonable interest rate.
- Borrower’s profile
The interest rate of a property loan is also dependent on the borrower’s profile. Factors like age, employment status, income profile, etc., impact the interest rate and available loan amount. For instance, salaried applicants can convince lenders of affordable interest rates due to stable income, thereby substantiating repayment capability.
- Credit score and repayment record
Before sanctioning the loan amount and imposing interest rate, lenders evaluate the credit score and history of the applicant. This verification is an essential part of a hard inquiry that gauges the borrower’s repayment capability. Hence, borrowers with an impressive credit history and a CIBIL score of 750+ can negotiate with lenders to impose competitive interest rates.
Since the default risk is on the lower side, lenders offer better services and customised offers. In this regard, borrowers can take the help of a property loan eligibility calculator to determine the amount they are eligible to avail and apply accordingly to avoid rejection.
- Loan repayment tenor
The selected tenor also impacts the interest rates of loan against property. Every borrowing comes with a specified repayment structure. Failing to determine one’s financial capability will lead to a repayment burden or debt-like issues. Opting for an extended tenor will increase the overall interest outgo but reduce EMIs and vice-versa.
On the other hand, borrowers can opt for a balance transfer and shift the outstanding amount to a reliable lender offering lower interest rates and exclusive services. Furthermore, borrowers can get property loan tax benefits under Sections 37 and 24 and claim deductions on interest payments.
Apart from these factors, lenders evaluate the debt-to-income ratio before approving loan amount. Therefore, it is wise to maintain a certain percentage or lower debt-to-income ratio to ensure prompt approval. Furthermore, if borrowers can assure lenders about timely repayments, lenders will levy an affordable interest rate against the borrowed amount.
Furthermore, reputed financiers offer affordable interest rates to credible borrowers along with customised pre-approved offers. These offers are applicable to products like LAP, home loans, etc. Borrowers can check their pre-approved offers by mentioning their names and contact details.
Therefore, to summarise, when considering to avail a property loan, borrowers must look out for the factors that significantly influence the interest rates. Besides, potential borrowers must arrange property documents to streamline the loan application further.
