A Loan Against Property (LAP) is an excellent financing tool.
This type of loan involves a borrower taking a loan against a property they own.
The property pledged as collateral could be a residential or commercial property or even a piece of land.
So, here’s a look at the factors that affect Loan Against Property interest rates.
A good credit score indicates a responsible attitude towards credit as well as good repayment capacity.
On the other hand, a low credit rating deems one as a risky borrower and leads to lenders offering high-interest rate home loans to borrowers.
Most lenders offer lower interest rates for residential properties as opposed to commercial properties.
On the other hand, centrally located properties with all modern amenities draw a much lower rate of interest.
All lenders extend their best loan offers to existing clients. Why? The answer is simple: the lender has known the borrower long enough to ascertain their repayment capacity.
Thus, they know the risk involved for them in lending money to the concerned borrower.
If you are someone who switches jobs frequently, you may be offered a Loan Against Property at high-interest rates.
Similarly, if you do not meet your lender’s income eligibility requirements, your application may get rejected.
When borrowers opt for a long loan tenor, they not only increase their total interest payout but also increase the risk involved for the lender in lending money.
If you wish to avail of a low Loan Against Property interest rate, keep the loan tenor neither too short nor too long.
Lastly, keep in mind that loans against property interest rates also depend greatly on external factors, such as the Repo Rate and SLR.