The interest rate and repayment tenor are crucial in deciding a loan’s affordability and overall cost. If one possesses a residential or commercial property, one of the simplest ways to fulfil emergency requirements is by opting for a loan against property. One can repay in monthly instalments along with the pro-interest component when availing of such financial products.
Having said so, it is essential to know and understand the applicable property loan interest rate and terms and conditions related to the financial product.
Top 5 Factors Impacting Property Loan Interest Rate and Tenor
Several factors play a significant role in determining property loan tenor and interest rates. If the interest rate is lower, the financial burden will decrease significantly. On the other hand, if the repayment tenor is lower, then EMIs will be higher.
Nonetheless, here are the factors influencing the interest rate and tenor of loan against property:
This is one of the crucial factors impacting property loan interest rates. Since the property is provided as collateral, lenders analyse the condition of the property that, involves the property’s location, condition, age, current market value, before arriving at the interest rate to be levied.
Borrowers owning commercial properties at prominent locations are more likely to get affordable interest rates than residential properties in the outskirts.
If the home loan amount is higher, the tenor will be longer. Such a system is approved by lenders and is even suitable for borrowers in repaying the loan without defaulting. This is because the property loan EMI is spread over an extended tenor and does not put an additional burden on the borrower’s monthly budget.
Age is crucial in determining the loan tenor, interest rate, and amount. Young candidates can expect a considerable loan amount and extended repayment tenor. However, this does not guarantee a lower interest rate.
Similarly, senior applicants approaching retirement may have to pay the higher interest due to poor earning capacity in the future. Therefore, one must apply at an appropriate age by forming a strong credit history and a steady career.
Credit score and history play a significant role in determining the interest rate and tenor. For instance, usually lenders prefer borrowers with a healthy credit score of 750 and above. This is because lenders consider such borrowers more reliable than those with poor CIBIL scores for property loans. Therefore, a higher credit score and good repayment history will allow borrowers to negotiate with lenders for better interest rates and favourable loan tenor and terms.
Borrowers frequently switching jobs will not be eligible for an affordable interest rate against a loan against property. This frequent change of job indicates a borrower’s unstable career. Moreover, it implies that it will be difficult for him/her to repay the loan in the future. In addition to that, lenders also consider employers’ credibility.
By considering the above aspects, borrowers can improve their chances of availing an affordable loan against property rate of interest. Besides, such factors help improve repayment potential. Apart from these, existing borrowers can enjoy the benefit of customised pre-approved offers on a wide range of financing options, such as home loans, loans against property, etc. To check the pre-approved offers, borrowers need to mention their names and contact details.
To conclude, now that borrowers are aware of the key factors impacting property loan interest rates, they must take the right steps to avail of the most cost-effective loan. Also, applicants must look for a reputed financial institution offering flexible terms to ensure hassle-free repayment without hampering other financial obligations.