Life is uncertain and one can never know when they might require financial assistance to take care of a situation. This could be anything – being faced with a medical emergency, need to pay your kid’s academic fees, undergoing heavy losses in business, or any other personal reason. Now, not every individual would prefer dipping into their personal savings to tackle these expenses. In such cases, you can always opt to apply for a loan against property. You can get this loan by pledging your property as collateral. Lenders usually offer about 80% of the property value, which is an ample amount to take care of your expenses.
However, before taking this loan, it is important to make sure that the loan can easily be paid off without any financial struggles. For this, you need to understand whether the lender is offering an interest rate that eases the repayment of the loan’s monthly instalments. Now, financial institutions consider numerous factors while setting a loan against property interest rate.
Therefore, to get a good deal on your loan against property, it is important to be aware of the following factors that influence the loan’s interest rate:
- Applicant’s existing debt
If you are already under a lot of debt, taking on another loan might not be possible. Your repayment capacity is already limited because of the existing obligations and taking another loan can further decrease your spending capacity. It is better to clear off any existing loans before applying for a loan against property. Having no existing debt can also help the lender to offer you a lower loan against property interest rate.
- Property type
Many borrowers are unaware of the fact that even the type of property that they pledge as collateral can influence the interest rate of the loan against property. This is because lenders offer different interest rates for commercial and residential properties.
- Credit record
Any lender will check an applicant’s credit score before approving their application. This is why it is very important to keep a good credit score before applying for any loan. Generally, it is advised to maintain a credit score of 750 or more. This can also help in getting a lower interest rate on the loan against property.
Therefore, these are factors that influence a loan against property interest rate. By knowing about them, you can avoid getting stuck with a high interest rate on your loan. This will help in keeping the EMI payments affordable and bring down the overall cost of the loan. Also, before going ahead with submitting your loan application, it is advisable to check with the lender regarding their loan against property eligibility criteria. This way, it is possible to understand the loan amount that the lender is ready to offer. You can then decide whether to apply for the loan or look for a better loan plan that suits your budget.