Reasons to Focus on Loan Against Property Interest Rates and Tenor When Taking a Loan
Taking a loan against property helps you get high-value funding. What’s more, lenders offer competitive loans against property interest rates so you can repay more affordably as compared to unsecured loans. Here, you pledge your immovable asset as security against which lenders approve between 60% and 90% of the property’s value as a sanction.
With a loan against property, there are no end-use specifications; this means that you can apply the funds wherever you need them. You can use the funds to host a wedding, pay for higher education or expand your business operations without any hassles. However, to ensure financial wellbeing, it is important to understand two key aspects of the instrument, which are the loan against property interest rates and the repayment tenor. These greatly affect your overall experience and you shouldn’t overlook them at any cost.
To know what makes them a key deciding factor when opting for a loan against property, read on.
Loan against property interest rates
It is no surprise that the loan against property interest rate is a key deciding factor. The applicable rate dictates the total cost of borrowing and so, your priority should be to get the lowest interest rate possible. A common approach is to compare lenders based on their offer and go with the option that has the lowest rate. However, this isn’t the only way to secure an affordable deal. As a borrower, you can also learn about the different factors that affect the rate offered and improve your eligibility to get a better deal.
Several factors such as your income, employment status, property value, the loan amount based on the LTV ratio and your credit profile are all assessed when determining the loan against property interest rates. Here is a brief overview to help you better understand these factors.
- Employment status:
Employment stability is a crucial component as lenders will use it to predict your repayment capabilities. For self-employed professionals, a stable source of income is mandatory for availing a favourable interest rate. Be it from the established business, rental income, or other sources of passive income, all of these matter to lenders. On the other hand, salaried borrowers need to maintain a stable job with a reputed organisation to prove their eligibility.
- Property Value:
Generally, the value is based on the property’s age, location, condition, and it is a crucial factor for when determining the interest rate. A high-value property will fetch you better terms and will allow you to borrow a higher sanction without any hassles. However, a property with a lower value may not get you the sanction or the interest rate you want as it increases the risk incurred by the lender.
- Credit profile:
Lenders require you maintain a good credit history, clear of any prior defaults, and insist that you maintain a credit score of at least 750 when applying for the loan. This helps qualify for the loan, and it also ensures you get a good interest rate on your loan. A healthy credit profile proves that you are an experienced borrower and you can handle timely repayments alongside other financial priorities.
- LTV and loan amount:
Lenders offer a sanction based on the value of the property pledged as collateral. This is also known as the loan-to-value ratio or LTV and generally, you can avail an LTV between 60% and 90%. The LTV percentage you opt for can affect the interest rate as it is directly proportional to the risk incurred by the lender. A higher LTV percentage means greater risk and lenders will likely levy a higher rate to minimise potential losses. So, if you want to secure an affordable rate easily, borrow a lower LTV percentage.
Loan repayment tenor
The tenor is the other key deciding factor because it controls repayment. Ideally, you should pick a lender that offers a flexible tenor as this allows you to find the best option for your budget. Moreover, the tenor allows you to control your interest outgo and this is important ensuring an affordable experience. Remember, a short tenor translates to higher EMIs but decreases the interest outgo drastically. Alternatively, a longer tenor reduces the EMI amount but increases interest outgo.
Keeping these factors in mind, you can now make informed decisions about your loan against property terms and conditions. Be sure to compare the offerings from various lenders to get the best deal in the market. A sure-fire way to guarantee this is to opt for the Bajaj Housing Finance Loan Against Property. It offers a competitive loan against property interest rate on the ample sanction and has a flexible tenor of up to 20 years. To finance any urgent or planned expenses without any hassles whatsoever, apply online and get easy approval.