Summary: A loan against property is a popular choice among borrowers. However, a few important factors, such as loan interest rate, eligibility criteria, and loan repayment tenure, need to be considered before applying for a LAP.
A loan against property is a kind of secured loan that involves pledging your property as collateral to borrow money. This type of loan is popular in India and is an excellent way to raise funds for various purposes, such as financing a business, funding education, or consolidating debt.
This article will cover the four things you must know about loan against property in India. These factors also determine the loan interest rate.
Your Credit Score
One of the key factors to consider before applying for a loan against property is your credit score. A good credit score is vital in helping you secure a loan against property with attractive interest rates.
Your score is a reflection of your past credit behaviour, and it plays a crucial role in determining your creditworthiness.
If you have a high credit score, typically above 750, lenders are more likely to offer you lower interest rates, as they consider you a low-risk borrower. On the other hand, if your credit score is low, lenders may consider you a high-risk borrower, and you may end up paying higher interest rates.
Before applying for a loan against property, it is recommended that you check your credit score and credit report to ensure that they are accurate and up-to-date. If there are any errors or discrepancies, you can take steps to rectify them and improve your credit score.
Loan Interest Rate
The interest rates for loans against property are usually lower compared to unsecured loans such as personal loans or credit cards. The interest rates for loans against property start from 8% and can go up to 15% depending on factors such as the borrower’s credit score, property type, and loan tenure.
When you take it against property, the property loan interest rate is lower than an unsecured loan as it is a secured loan, and the lender has collateral in the form of the property.
The borrower’s credit score and income are also important factors that determine the interest rate for a loan against property. The interest rate will be lower if the borrower has a good credit score and income.
Eligibility Criteria
In order to be eligible for a loan against property, the borrower must be a citizen of India, have a regular source of income, and be the property owner. The property should also be free from any legal disputes or encumbrances.
The borrower’s credit score and income are also important factors determining the eligibility for a loan against property.
The eligibility criteria for a loan against property are stricter compared to other loans as it is a secured loan. The lender needs to be assured that the borrower will be able to repay the loan and that the property is free from any legal disputes or encumbrances.
Loan repayment
Loans against property can be repaid in equated monthly instalments (EMIs) over a flexible tenure ranging from 5 to 20 years. The borrower can choose the loan tenure based on their repayment capacity.
However, it is advisable to choose a shorter tenure, as the longer the tenure, the higher the interest rate.
The loan repayment is made in EMIs, which includes both the principal amount and the interest.
The borrower can choose the loan tenure based on their repayment capacity. The borrower can also prepay the loan against the property without any prepayment penalty if the loan is taken on a floating interest rate.
Conclusion
A loan against property is a useful financial tool for individuals who need a large sum of money for various purposes. However, it’s important to understand the various aspects of this type of loan, including interest rates, tenure, borrower profile, and property type, before deciding.
By doing so, borrowers can make informed decisions and avoid any financial risks.
