A loan against property is one of the safest and popular financial products among borrowers. Individuals can utilise the funds to meet several financial requirements such as establishing a new venture, expanding business, service medical expenses, fulfil personal funding needs, etc.

Borrowers have the flexibility regarding repayment, and loan against property interest rate is lower, unlike other loans. But before choosing such an effective financial product, one must go through the following guide that can determine a loan against a property interest rate.

1. CIBIL score

One of the most important factors that affect the interest rate and LAP eligibility is the credit score. Therefore, it is recommended that one maintain a healthy credit score equal to 750 to avail favourable rates. Moreover, with a low credit score, the chances of loan application rejection are higher.

2. Higher down payment

Generally, a larger down payment results in a lower interest rate because lenders have a lower risk level. So, if one manages to increase down payment by just 20%, he/she can obtain a lower loan against property interest rates.

3. Loan tenor

In general, shorter-term loans can reduce the interest rates and borrowing cost but higher monthly instalments. Lenders may charge a higher interest rate if one applies for a shorter tenor in contradiction with a longer tenor.

4. Type of mortgaged property

The type of property to be collateralised plays a pivotal role in determining a loan against property interest rate. The loan against property may vary for commercial and residential properties since they have different values. Also, the property’s age and location might impact the interest rate.

5. Applicant’s profile

A borrower’s income, occupation, age, residence, etc., play a significant role in determining interest rate charges by the lender. Usually, financiers charge lower rates on loan against property for salaried employees, while self-employed employees may be charged with higher interest rates.

Thus, a loan against property comes with a flexible tenor and affordable interest rate due to its secured nature and hence, borrowers can repay the loan, impacting other financial goals.