Many borrowers prefer going for a loan against property, thanks to the flexibility that this loan offers in terms of end-usage. No matter what an individual needs the money for, be it for starting a business, clearing medical bills, paying for a wedding, or any other reason, a loan against property can cover these costs.
However, before applying for this loan, it is very important for a borrower to think about the interest rate of the loan. This is because the interest rate of a loan can significantly impact the loan’s monthly instalments. To know more about this, one needs to be aware of the factors that lenders take into consideration while setting loan against property interest rates.
So, listed below are some of the key factors that financial institutions take into account while setting your loan against property interest rate:
- Property that is pledged as collateral
The property that an applicant pledges as collateral to the lender for getting the loan is a factor that can influence the loan against property interest rate. The property is evaluated on the basis of its age, location, amenities, insurance, and so on. If the property has a high market value, the applicant is more likely to get offered a lower interest rate.
- Applicant’s credit score
Any financial institution will check their applicants’ credit scores before approving loan applications. This is to get an understanding of the applicant’s payment history. Ideally, a good credit score is considered to be 750 or more. Applicants with good credit scores are often offered low interest rates.
- Loan’s repayment tenure
For a loan against property, financial institutions generally offer borrowers a repayment tenure of up to 15 years. The tenure that an applicant chooses can also affect their total interest payment. If they choose a long repayment tenure, the interest payment will be more since it is added with each monthly instalment. However, if the applicant chooses a short repayment tenure, they can reduce interest payments by cutting down the number of monthly instalments.
- Applicant’s profile
Financial institutions also consider the applicant’s profile while setting the loan against property interest rate. The applicant’s employment type, financial records, monthly income, income tax returns, etc. will be taken into consideration by the lender while setting the interest rate of the loan. Do note that younger applicants having fixed monthly incomes are more likely to get offered lower interest rates on loans.
Most financial institutions consider these important factors for loan against property interest rates. So, make sure to keep these in mind before applying for the loan. You can also make use of a loan against property EMI calculator to understand whether the interest rate that is being offered by the lender is affordable. Also, do make sure to check with the lender regarding the loan against property documents that are required. This can help in simplifying the documentation process.
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