A loan against property (LAP) is one of the easiest ways to avail of a loan, especially in times of need. LAP is also known as a mortgage loan: it is a secured loan where the lender lends loans based on the value of the mortgaged property. You can avail of a loan against property for any purpose, including investing in a business project, financing your children’s education, meeting marriage expenses, or refurnishing your home.

Interest rates determine the total loan money you must pay while repaying a loan. Therefore, it is wise that you compare the interest rates across lenders by visiting their online websites. Financial online tools, such as loan against property interest rate calculator will help in providing an assessment of the interest rate that could be charged on the probable loan amount and the final EMI that you must pay based on the tenor you wish to avail. One can apply for a loan against property online through the official website of lenders (financial corporations). Many lenders provide all the services online. Make an application and they will send their representative to collect all relevant documents from your doorstep. 

Factors, such as your employment history, credit history, proposed loan amount, loan tenor, and property condition, also affect loan against property interest rates. Some of these factors are discussed below in detail.

Credit Score

Maintaining a good credit score is important if you wish to apply for LAP. Lenders will always check your credit result before granting a loan. A credit score of 700 and above deems an individual considered more creditworthy and therefore, their chances of loan approval at lower interest rates dramatically increase. Similarly, if you can show an impeccable credit history for three years at the time of making a loan application, your chances of getting a loan at a low interest rate increase considerably. A low credit score leads to genuine credit risk and therefore, for such individuals lenders charge a high rate of interest. In conclusion, lenders are entitled to increase the LAP interest rate if they find any major fall in your credit profile or creditworthiness. 

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Loan Tenor

The amount of time approved to repay the loan amount is known as loan tenor. The length of the loan tenor determines the LAP interest rate. A longer loan tenor will lead to lower interest rates. However, paying EMI for an extended period will cause you to pay a higher loan repayment amount. On the other hand, a shorter loan tenor will result in higher EMIs and a higher interest rate. 

 Value of Property

Under the LAP scheme, a loan is granted against a mortgaged property. Therefore, the value of the property is one of the main factors for deciding the loan amount and the interest rate to be charged on the availed loan amount. To determine the value of a property, a lender will send an expert to evaluate the property’s market price. A higher loan amount is sanctioned and subsequently, a lower interest rate is charged for a high valued property. 

Borrowers must know that the value of their property depends on several different factors, such as age, resale value, location, and type of property. Borrowers must also know that they can avail of a loan equal to around 45 to 90 per cent of their property’s value, depending on the condition of the property.

Job Profile and Income

Maintaining income stability is another crucial aspect for availing lower interest rates and possessing the ability to negotiate with lenders. An unstable career, frequent job switches, involvement in risky businesses, and other such situations can compel lenders to charge a higher rate of interest against LAP. A salaried person with a stable source of income is likely to be charged a lower interest rate than a self-employed individual since the latter’s source of income is not fixed. Furthermore, a borrower’s age and job type also play a significant role in regulating the interest rate. A borrower nearing retirement age may be charged a higher interest rate than a younger applicant in the same job profile. Also, some professionals, such as doctors and chartered accountants, are offered attractive LAP interest rates by lenders.

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Income Profile of Co-borrower

While availing of LAP, all the co-owners of your property automatically become your co-applicants as they must sign the property papers for granting authorization for the mortgage. Your co-borrowers profile must, therefore, have a good credit history as their profile will also be scrutinized while granting a loan against the mortgaged property. In the case of a partnership firm or a company, all the partners with a major share as well as promoter directors need to be co-applicants. While mortgaging a joint ownership property, where all the owners have a stable source of income, the odds of availing of a loan against property at lower interest rate decrease as the lender is at low risk of facing any default in payment. 

Now that you know how to avail of a LAP at low interest rates, apply now if you need the money urgently.