Are you looking to take a loan to expand your business but are apprehensive of the high-interest rates? Well, interest rates might seem like a small share of the amount, but even a 1% increase can make a huge impact.
Loan against property is an excellent option for those looking to borrow money at a low-interest rate than personal loans. And you can further reduce this interest rate if you have the right knowledge about the factors affecting it.
Here are four factors that affect the interest rate on your borrowed amount on LAP:
Your profile goes a long way in determining theloan against property interest rate the bank is going to charge you. Your age, employment, monthly income, etc. are deciding factors of how promptly you can repay.
Salaried employees are charged lesser interest rates than self-employed people because their income is more secure. Similarly, people inching towards their 50s or those about to retire, pay a larger interest rate than young people in their 30s.
It is the first check barrier to decide your eligibility, maximum loan amount as well as the loan against property interest rate you will pay. A credit score equal to or higher than 750 is eligible for good amounts of loans at reasonable interest rates.
Banks don’t trust people whose credit scores are low and charge a higher interest rate because of the risk involved in lending them. There are even higher chances that they’ll decline your loan request at shallow scores. CIBIL Score is universal, and every late payment decreases your score by a bit.
Type of Property
The condition, value, age, and so on of your mortgaged property also decides your interest rates. Banks mortgage properties near highways that might go up in price soon at low-interest rates.
Similarly, a newly constructed property will ensure a lower interest rate than the older ones. Interest rates on loan against propertyare more moderate for commercial properties as they are much more valuable than residential ones.
Loan tenure is a crucial factor that decides how much additional cost you’ll pay on the borrowed money. While long term loans may seem lucrative, they come with higher interest rates that can eventually make a big difference.
Commonly, the highest interest rate for LAP is up to 20 years. Try to maximize your loan repayment amount and minimize the tenure to bag lower interest rates. But loans for very short tenures also tend to have high interest rates at times.
Punjab Housing Finance, though, offers flexible tenures that allow you to repay loans on lower interest rates in up to 20 years. But don’t forget about the age limit of 55 for taking loans. If you are looking to take loans after that age, you can take it in the name of your son or so.