Basic Factors that Affect the Property Loan Interest Rate

What is a loan against property?

A loan against property is an affordable lending solution that allows you to borrow a substantial amount of money by pledging your residential or commercial property as collateral with a lender such as a bank or an NBFC. Because a loan against property is a secured loan, lenders can offer you affordable interest rates that are competitive when compared to other types of unsecured loans. 

One of the primary advantages of a loan against property is that borrowers are free to use the funds as they see fit, which no other secured loan allows. Additionally, the sanction amount is substantial, so you can use the funds for any purpose, such as emergency medical expenses, travel expenses, wedding expenses, property purchase or renovation, and so on.

The interest rate for a property loan is dependent on several other factors such as CIBIL score, property type, location, age, monthly income, LTV ratio etc. Here are some of the basic factors that can affect your LAP loan interest rate:

CIBIL Score

It is critical that you maintain a healthy CIBIL score because a lender will conduct a thorough background check to ensure that you are responsible and creditworthy. Your CIBIL score will indicate whether you have ever defaulted on any payments, such as credit card bills, personal loans, or home loans. A CIBIL score of 750 or higher will ensure that you are eligible for a loan against property and will allow you to benefit from favourable lending terms such as low interest rates, longer tenors, comfortable EMIs, and quick approvals.

Loan repayment Capacity

A loan against property is a high-value loan, and the loan amount may exceed crores, so you must carefully plan your finances before applying for an LAP loan. An LAP EMI calculator will assist you in gathering the necessary information, such as the EMI you will pay, total interest payable, and total principal loan amount. With these details, you can apply for a loan against property that fits within your budget.

Age

Your age is an important factor that a lender will consider because lenders prefer to approve loans against property for younger applicants who are just starting out in their careers rather than applicants who are nearing retirement age. An applicant who is nearing retirement age can still apply for an LAP loan, but their lending terms may include a higher interest rate and a shorter tenor due to the lender's increased risk factor. 

Read Also: Does CIBIL Score Affect Loan Against Property Eligibility?