All you Need to Know about Loan Against Property Interest Rates

A recent report has forecasted India's LAP loan market to witness a CAGR of 14% by FY2026. This growth can be attributed to the easy availability of substantial credits offered against simple documentation and eligibility requirements.

However, the repayment structure of a mortgage loan isn't always compatible for some individuals. They are always on the lookout for ways to reduce the total repayment based on their income structure.

Here are some proven factors that every borrower must know to reduce his/her loan against property interest rate effectively.

What are the factors influencing the LAP rates?

An individual opting for a loan against property needs to consider the following points since these can influence the property loan interest rates – 

1. Borrower's profile

A borrower's profile is a crucial factor when it comes to borrowing funds. Since lenders undertake a certain degree of risk when disbursing funds, they check information like income source, age, address proof, etc. This substantiates the reliability of repayment and leads to fewer chances of default. Typically, individuals with significant income have better chances of loan approval and reduced interest rate.

Similarly, an individual's employment status is a vital factor that influences the mortgage loan interest rates. Lenders deem salaried employees with sufficient work experience as creditworthy. Comparatively, a self-employed individual may need to pay higher interest.

'Age is just a number', this statement doesn't sit well with financial institutions. Ideally, younger applicants are more likely to acquire the most competitive mortgage loan interest rates due to their higher number of workable years.

2. Repayment tenor

Selecting the repayment tenor is again a factor that influences the interest rate. Availing of a LAP loan obligates a borrower into following a set repayment structure. Here the loan tenor decides an individual's instalment proposition. Whilst a shorter tenor helps bring down the total interest outgo, opting for an extensive tenor can notably lower one's EMI burdens.

Opting for a shorter tenor also makes a borrower eligible to avail lower interest rates.

Hence, it becomes essential to determine the ideal tenor of one's loan against property to make an informed decision. This would facilitate the best interest rates and comfortable repayment structure. For a streamlined process, one can also take the assistance of a loan against property calculator and settle on the compatible factors.

3. The mortgaged property's value

The mortgaged property is often the principal focus after the borrower's credibility. Typically, the lending institution decides a loan against property interest rate based on the property's value. For instance, a residential property located at a prime location and surrounded by amenities would carry a high credit value and attract lower interest rates.

Additionally, the age of the property also plays a deciding factor. Older properties tend to be riskier due to their reducing value. Comparatively, newly constructed projects attract affordable property loan interest rates. 

4. CIBIL score

When availing of a LAP, it is imperative to know how a mortgage loan influences the CIBIL score and vice versa. Usually, an applicant with a 750+ credit score and remarkable repayment history has better chances of availing a lower interest rate. Such applicants also receive the power of negotiation that allows them to make their borrowing affordable.

Apart from better rates, borrowers must also look for other benefits while applying for a loan against property. 

For instance, reputed HFCs provide pre-approved offers that make the application process quick and convenient. These offers are available on several financial products like home loan, LAP, etc. Check your pre-approved offer by sharing details like your name and phone number.

LAP is a lucrative credit option for individuals looking to strengthen their credit backing. However, the interest rate can be an influential point in increasing one's disposable income. Hence, understanding what is mortgage loan and keeping track of the factors mentioned above would help an individual find the most suitable borrowing rate.