Factors That Influence Your Commercial Property Loan

A financial crisis can occur at any time, and most people do not have enough savings to cover such a large expense. In this situation, a loan against commercial property is ideal because you can receive a substantial sum of money to cover any expenses you may have, but to understand it more you need to know about commercial property loan. The most advantageous aspect of a commercial property loan is that the interest rates offered are quite low when compared to other types of loans, making it affordable for eager applicants. 

Here are some of the factors that influence your commercial property loan:

Loan To Value (LTV) Ratio:

A lender will inspect your property to determine the loan-to-value ratio in relation to the current market value of your property. Depending on the value of your property, a lender will grant anywhere from 75% to 90%. Although, due to its higher resale value, a residential property will help you obtain a higher valuation than a commercial property.

Property Details

The specifics of your property are critical in the evaluation and approval of your commercial property loan. A property in a desirable location, surrounded by the latest recent amenities, that is new and well maintained will command a higher price than an unkempt and old property.

Documentation 

When applying for a loan, the lender will require you to submit a prescribed set of documents, and your loan approval is dependent on these documents, so it is critical that you submit the entire set of documents, as missing any necessary documents will cause your loan disbursal to be delayed or may result in the rejection of your commercial loan application.

CIBIL Score

Your CIBIL score assures the lender that you are creditworthy and capable of repaying a loan without missing monthly installments. Borrowers with a high CIBIL score can benefit from favourable lending terms such as faster loan approvals, higher sanction amounts, longer tenors, and lower interest rates. If you have a CIBIL score of 750 or higher, a lender will consider you to be a low risk factor.

Interest Rates

Because of the resale value and demand for a residential property, the interest rates for a commercial property loan are higher than those for a residential property loan. However, when compared to other types of unsecured loans, such as personal loans, a commercial property loan will still offer you affordable interest rates.