Loans against property are a type of secured loan availed of by pledging a residential or commercial property or even a piece of land as collateral. Under this type of loan, the lender gets the right to sell the property for loan recovery in case the borrower defaults on loan repayment. The borrower, however, remains the sole owner of the property through the tenor of the loan and can use it as they like. Since loans against property are secured in nature, lenders sanction these loans at low-interest rates and for long repayment tenors. Further, borrowers can use the money as they like -- the loan comes with restrictions on usage.
While availing of a loan against property, borrowers must keep a few things in mind if they want to make the process of repaying the loan stress-free and simple.
Factors that Affect Loan Against Property
Quality of the Collateral
When it comes to a loan against property, the first thing that matters is the quality of the collateral. Properties will high resale value minimize the risk involved for the lender. Therefore, properties with better resale value draw a lower rate of interest than properties with low resale value. This is the reason why approval comes easily and loan terms and conditions are more beneficial when borrowers avail of a loan against a new property located in the centre of the city. Similarly, properties that have all modern amenities also help borrowers enjoy low-interest rates and better loan terms. On the other hand, old properties or properties located on the outskirts are not preferred by lenders and lenders usually sanction a lower loan amount at high-interest rates against these properties.
Loan Amount and Loan Tenor
The loan amount you apply for and the loan tenor you opt for also impact one's eligibility for the loan as well as the loan's terms and conditions. When borrowers avail of a loan amount lower than what they are eligible for, lenders offer them better loan deals, simply because the risk involved for the lender decreases in this case. As an example, if the property you are pledging as collateral is worth Rs.1 Crore, you are easily eligible for a loan of Rs.50 Lakh. If you apply for a loan of Rs.30 Lakh in this case, not only will loan repayment become easier for you but your lender will also offer you better loan terms and conditions. This is why borrowers are advised to use loan against property eligibility calculator to assess the loan amount they qualify for before beginning the loan application process. Similarly, when borrowers opt for short-tenor loans, again, the risk involved for the lender decreases. This, in turn, causes the lender to offer the loan on better terms and conditions.
Credit Score
Many people think that since loans against property are secured loans, lenders would not concern themselves with the borrower's credit score. This is certainly not the case. It does not matter the type of loan you apply for, your lender will always look at your credit score to gauge your repayment capacity and the risk involved for them in lending you money. To be able to avail of the lowest loan against property interest rates along with other beneficial terms and conditions, such as zero prepayment charges and long loan tenor, you must have a CIBIL score of at least 750. If your CIBIL score is anything below 750, improve your credit score first and then apply for a loan.
Age and Income Stability
Lenders also check a borrower's age and income stability to understand whether or not they will be able to repay the loan on time. Borrowers who have a stable income and have been in the same job for an extended period get better loans against property deals. Similarly, young borrowers who have more working years ahead of them and are more likely to get promotions and pay hikes are offered better loans against property deals than old people who have only a few working years left ahead of them.
.png)
0 Comments