One must always be prepared for contingencies for life can start throwing curveballs our way without intimation. When a financial emergency strikes, most people either ask family and friends for help or sell gold or a property they own but a far better way to deal with a financial emergency is to avail of a loan against property you own.
Loans against property, more popularly known as property loans, are loans availed of against a residential or commercial property that is in the applicant's name. The lender keeps the property as collateral by placing a lien over it. Once the borrower repays their loan, the lender removes the lien
from the property and then, once again the borrower becomes the sole owner of the property. However, if during the tenor of the loan, the borrower defaults on loan repayment or does not pay their EMIs for an extended period, the lender can sell the pledged property for loan recovery. This crucial factor makes property loans a zero-risk deal for lenders, which is why lenders charge a very low rate of interest on these loans. Currently, property loan interest rates are quite low. Further, property loans come with a long repayment period of 15 to 18 years. Such a long repayment period helps keep loan EMIs affordable. Property loan funds also come with zero end-use restrictions and therefore, one can use the money to fulfill any kind of personal or professional obligations.
So, if life has unpleasantly surprised you and you need money to handle a personal or professional emergency, consider availing yourself of a property loan. Here are a few tips on how you can avail yourself of the lowest property loan interest rate possible.
1. Maintaining a credit score above 750 will certainly help. Such a credit score indicates excellent creditworthiness and repayment capacity and therefore, loan applicants with such a credit score get the lowest interest rates possible on a loan.
2. The quality of your collateral will also affect the interest rate you get. High-quality collaterals with high resale value fetch borrowers a lower interest rate than low-quality collaterals that do not offer much security to the lender.
3. Though loans against property are secured in nature, your income and job stability will count. Individuals with a stable job and stable income are less likely to default on loan repayment and therefore, get better deals on property loans.
4. The tenor you choose to go for will also affect the interest rate you get. In the case of long-tenor loans, chances of loan default increase too. Therefore, lenders generally charge a higher rate of interest in the case of long-tenor loans.
5. Lastly, the loan-to-value ratio you opt for will also affect your property loan interest rate. The loan-to-value ratio refers to the percentage of a property's total value that has been availed of as a loan. High LTV ratio loans pose a higher risk for loan applicants and therefore, lenders charge a high rate of interest on these loans. If you want to enjoy low property loan interest rates, opt for a low LTV ratio loan.
Loans against property are an excellent financing option, especially when you need access to a sizeable amount at low-interest rates. If you are planning on availing yourself of a low loan against property, keep the tips mentioned above in mind.
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