5 Factors That Decide Your Loan Against Property Interest Rates
A loan against property is a reasonably simple way to get money when you need urgent cash. You can avail of the loan by submitting your property papers.
Pledging a property to avail a loan is beneficial for two reasons – (1) the interest rate is much lower than most other loans, and (2) you can monetise the property’s real value.
Generally, the interest rate of a loan against property, also known as loan against land property, is one of the lowest. However, a lender may increase the interest rate when a borrower fails to meet the lender’s expectations. Hence, loan against property interest rates depends on the borrower’s eligibility.
Read on to discover the top five factors that affect loan against land property interest rates-
1. Age
Age plays a crucial role in determining loan against property interest rates. A borrower can apply for a loan against land on attaining the age of 21. Also, the maximum age at the time of loan maturity cannot exceed 65. When you avail of a loan early in life, your repayment capacity will be higher, and hence, you can expect the lowest interest rate. However, the closer you are to the maximum age, the higher the interest rate will be.
2. Monthly Income
Monthly income has two components – salary income or income from a business, and net income or income minus fixed expenses. Lenders usually prefer borrowers whose net income is decent enough to repay the EMIs on time. For example, if your income is INR 50,000 every month and you spend INR 30,000 every month, your net income is INR 20,000. In such a case, a lender will consider the net income while determining loan against land interest rate. The best way to get the lowest interest rate is by clearing off existing loans before applying for a loan against property.
3. Credit Score
The credit score is one of the most accurate indicators of a borrower’s financial health. When you repay EMIs on time, your credit score increases, sending a strong signal about your repayment capability. Hence, lenders will not mind offering you the best loan against land property interest rate. Generally, a score of 750 and above is considered the benchmark. However, if your score is any lesser, you can still avail a loan and repay on time to increase the eligibility and request the lender for an interest rate reduction.
4. Property Type
Property type includes the type of property, its status, age, and condition. Loan against land property interest rates are usually different for commercial and residential properties. Similarly, if the property you wish to mortgage has some legal issues, the lender may enhance the rates. The age and condition also matter when the lender evaluates the property. For a new property in a prime location, lenders may offer the best rate.
5. Loan Tenure
Generally, the shorter the loan term, the higher the loan against property interest rate. When you choose a shorter tenure, the EMI amount increases and the lender may consider the loan riskier. In contrast, a higher loan term decreases the EMIs, and lenders may offer lower rates. Hence, before applying for a loan against land property, it is prudent to use an EMI calculator to understand the impact of tenure and select the right tenure.
Conclusion
Increasing eligibility is vital for getting a low-interest loan against land property. Check the lender’s terms and repayment options before signing the application form. Also, negotiate with the lender if you are confident that you deserve a discounted interest rate.