Loans against property or property loans are loans availed of against the value locked inside a residential or commercial property or land. Borrowers pledge a property they own as collateral or security and avail of a loan against it. Once the borrower pledges a property they own as security, lenders place a lien on it, making it unlawful for the loan borrower to sell the pledged collateral until they have cleared the loan. Since borrowers borrow these loans against collateral or security, the loan against property interest rates tend to be low. Currently, the property loan interest rates start as low as 8.30% per annum.
However, not everyone gets approved for these low property loan interest rates. Your lender decides the rate of interest to be offered to you on your loan after taking into consideration several different factors. Below we discuss these factors and share tips on what borrowers can do to secure a low loan against property interest rates.
Loan Against Property Interest Rates: How to Secure the Lowest Rate of Interest on Your Property Loan
Loan against property interest rate starts as low as 8.30% per annum. However, lenders do not extend these low mortgage loan interest rates to all loan applicants. In fact, in some cases, the loan against property interest rates can go as high as 12% per annum. Such a high loan interest rate considerably increases the burden of loan repayment. If you wish to secure yourself a low loan against property interest rate, here are some simple things you can do that will help.
1. One of the first things you must do to help you secure yourself a low loan against property interest rate is to maintain a high CIBIL score. A CIBIL rating above 750 indicates an excellent ability to repay loans on time and without defaulting. Maintaining a high CIBIL rating is easy if one uses credit smartly and is serious about repayment. Never missing loan EMIs and credit card bill due dates, maintaining a low credit utilization ratio on credit cards, having a mix of both secured and unsecured loans and having a long and reliable credit history goes a long way in helping borrowers maintain a high CIBIL rating and secure a low mortgage loan interest rates.
2. The LTV ratio you opt for is also very important. The LTV ratio is the ratio or percentage of your property’s net market value that you plan to avail yourself of as a loan. When you ask for a very high loan amount, the LTV ratio goes up and so does the risk of default. Therefore, lenders sanction high LTV ratio loans at low interest rates. On the other hand, low LTV ratio loans are easy to repay as they lead to affordable and economical EMIs. Therefore, the risk of loan default is low in the case of these loans and hence, lenders sanction low LTV ratio loans at a low rate of interest.
3. The debt-to-income ratio is important too. The debt-to-income ratio is the percentage of your total income going towards loan or credit repayment. If you are already dedicating a significant portion of your income towards debt repayment, paying off another loan won’t be easy for you. These days, lenders do not sanction loans to people who are already dedicating more than 40% of their income towards covering debt. If you want to secure a low loan against property interest rate, pay off some of your debt and bring down your debt-to-income ratio or FOIR.
4. Lastly, the collateral you choose will also affect the property loan interest you get. High-value and high-quality collaterals have high resale value and therefore, they carry lower risk for lenders and lenders charge a low loan against property interest rate on these loans. On the contrary, when a borrower pledges a low-value loan, lenders reduce the risk for them by charging a high loan against a property interest rate. Properties located in the city centre or properties located in new apartment buildings built by reputed builders are considered high-value collaterals.
Doing these simple things will allow you to get approved for a loan against property quickly and also avail of the loan on the most beneficial loan terms and conditions.
