Factors that Determine your Property Loan Interest Rate

The interest rate is one of the most crucial factors to consider while availing of a loan against property. Notably, every lender offers property loans at different interest rates. While opting for a mortgage loan, the applicants should look for lenders that offer loans at a lower rate of interest.

But how is the property loan interest rate determined? There are various factors that greatly impact one’s interest rate for loans against property.

Key factors that affect the property loan interest rate

When it comes to applying for a loan against property, borrowers are always concerned about interest rates. These factors help lenders in deciding the interest rates of LAP for a particular applicant.

Credit score

A credit score indicates one’s creditworthiness and thus is an important consideration when deciding interest rates. Applicants with credit scores of 750 or more are liable to receive lower interest rates on loans against property. However, applicants with low credit scores are considered risky by lenders, and they provide loans at higher interest rates.

Read Also:- Increase Your CIBIL Score Above 800

Loan repayment tenor

Another significant factor that decides the interest rates of property loans is the loan repayment tenor. The longer the tenor will be, the smaller amount of EMIs one needs to pay, and vice-versa. In fact, the borrower also has the flexibility to repay back the loan earlier than the stipulated tenor by opting for a shorter tenor.

Usually, most lenders provide a lower interest for loans of longer tenor as they can earn interest for a longer period. Shorter tenor loans can attract higher interest rates. 

Read Also: Loan Against Property Repayment Tenor

The applicant’s profile

Whether the applicant is a salaried individual or self-employed also determines the property loan interest rates. Usually, salaried applicants are offered loans at lower interest rates than self-employed ones because of their income stability.

Apart from this, the applicant’s age, monthly income, and the location where they are residing also play a vital role in deciding the property loan interest rate. To know in detail about it, one can check the loan against property eligibility section on the preferred lender’s website.

The type of property to be mortgaged

Whether the property that the borrower is planning to mortgage is residential or commercial also decides the interest rates on the loan against the property. In addition to this, whether the property is located in a posh area with all the necessary amenities or in a rural area or outskirts of the city also matters when deciding the LAP interest rates.

Those having new properties in a prime location can get lower interest rates on loans.

Type of interest rate

Last but not least, the type of interest rate the borrower is opting for, whether fixed or floating, also helps ascertain the property loan interest rates. Depending on the interest rates, one can even calculate their payable EMI amount from time to time using the loan against property EMI calculator.

Thus, these are the basic parameters to be taken into consideration by various lenders while determining the interest rates on loans against property.

Various financial lenders and NBFCs provide their customers with some pre-approved offers to make the loan application process more simplified and hassle-free. These offers are available on varied financial loans products like home loans and others. Borrowers can check their pre-approved offers from the lender’s website. All they need to do is provide their required credentials like their names and contact numbers.

One should use an EMI calculator to compare loan offers and choose a lender with suitable property loan interest rates.

By Cary Grant

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