Loan against property (LAP) is popular for availing of substantial credit by pledging real estate property as collateral. loan against property is extensively used by business and salaried individuals alike as it does not restrict the borrower in terms of the end-usage of the loan amount. A loan against property allows borrowers to use the loan amount for various personal as well as business purposes, such as expanding business investment, meeting education, medical, or marriage expenses, refurnishing home, and other financial issues.
loan against property is a highly sought-after loan scheme for its relatively low interest rate. Moreover, as a secure loan, its eligibility criteria are minimal, and the application is smooth and hassle-free. With all the documentation in place, you can avail a property loan in only 72 hours* from some leading lenders.
Table of Contents
Eligibility of Loan Against Property Interest Rate
In general, the eligibility requirements for loans under the loan against property scheme are the same as those for other types of loans, with the exception of the property evaluation and verification process, which might take several weeks. To be eligible for a sanction under loan against property, an Indian citizen must be able prove a consistent source of income, either through a salary or a business. Salaried applicants must be aged 23-62 years to be eligible for a loan against property, whereas self-employed applicants must be aged 25-70 years.
Further, the applicant must be the legal owner or co-owner of real estate that is free of legal encumbrances and that meets the other prerequisites to apply for this loan. It is necessary for all co-owners to apply for a loan against their property if there is more than one legal owner of the property at the time of application.
A property’s market value is used to determine the loan amount one can avail of. Lender’s typically offer up to 70-75% of the property’s market value as funding. The exact amount varies as per the applicant’s profile and the property’s age, location, and condition.
Types of Interest Rate
There are two types of interest rate: Fixed Interest and Floating Interest.
Fixed Interest Type: A fixed interest rate simply means that the borrower will return the principal amount with interest in equal monthly instalments throughout the duration of the loan, or till a reset date, at a predetermined interest rate. This is a good option when the market conditions are such that the prevailing interest rate is at a historic low. Moreover, it gives the borrower a sense of certainty as to how much s/he will be paying in the years to come.
Floating Interest Type: A floating interest rate is one that fluctuates or changes in response to market conditions. If you choose a floating interest rate on your loan against property, you will pay a base rate while the loan has a floating component. The base rate is just the lender’s minimum interest rate or the interest rate benchmark. Banks and financial institutions are not permitted to lend below the base rate. As a result, whenever the base rate changes, the floating rate changes as well.
Factors Affecting Loan Against Property Interest Rates
In order to estimate loan against property interest rates, a variety of criteria must be taken into consideration, some of which are listed below:
The interest rate on loan against property is one of the most important factors to consider when making a decision. Lenders typically impose a fluctuating rate of interest on loan against property for the length of time that has been agreed upon.
Credit Score and Credit History
Maintaining a good credit score of 750 or higher will assist you in obtaining a reduced interest rate on your loan against property loan. Maintaining a disciplined credit history for at least 2 years prior to the time you intend to apply for a loan will play a critical role in decreasing your interest rate and expediting the loan application and approval procedure.
A stable job profile with a steady income offers lenders a level of repayment security, which in turn serves as a catalyst for obtaining a more favorable interest rate. Because of the steadiness of their income, some professions, such as doctors and chartered accountants, are eligible for attractive loan perks from lenders.
Value of Property
When making lending decisions, lenders take the loan to value ratio into consideration. A physical inspection of the property by an expert to determine its current market worth, as well as legal confirmation of the property documents, are required in order for lenders to evaluate all of the risk factors involved. The quality of the property has an impact on the interest rate that is paid on the loan. When compared to a home in an interior region, a residential property in an affluent society will command a lower interest rate than a property in the suburbs.
Loan Against Property EMI Calculator
This online financial tool assists in determining the interest rate to be paid on a loan against property before taking out the loan itself. It is necessary to supply information to the loan against property EMI calculator, such as loan amount, loan tenor, and property value, in order for it to calculate potential interest rates and EMI based on market lending rates.