When seeking financing of high quantum, you may come across several loan options available in the market to fulfil your funding needs. However, the drawback of many such loans is that they are directed towards specific usage, meaning you cannot utilise them for other spending purposes, if the need be. Loan against property is an alternative funding option that comes off as a financing avenue you can depend on irrespective of your spending needs. This means that you can avail the advance for all types of expenses, both personal and professional. LAP loan interest rates are affordable too, allowing you to accommodate your repayment liability conveniently as per your monthly income.
As high-value advances, these loans come with significant financial responsibility as well, which need to be figured out and planned before availing funding. One must thus be aware of a few critical aspects when availing the loan. Given below are some of them.
LAP Loan Interest Rates and Charges
Interest rates on loan against property are determined based on a handful of factors that impact the borrower’s eligibility and other regulatory norms. They include the following.
- Age of the applicant
- Minimum monthly income
- Occupation (Salaried or self-employed)
- Employment stability
- Residential stability
- Type of interest rate
- Loan to Value ratio
- Positive credit score of the applicant
Based on these aspects and their qualifying limits, the lending institution determines the LAP loan interest rate to be levied. While not all factors can be changed, the borrower can work up on the improvement of certain eligibility factors that should help with a leverage for interest rate negotiation.
Also, make sure to check other applicable fees and charges, which should ultimately help determine the cost of the loan against property availed.
You can use a loan against property eligibility calculator to determine the maximum loan amount available to you based on your financial standing and other eligibility factors and choose a loan amount accordingly.
Repayment Tenure Selection for Property Loan
Along with the LAP loan interest rate, you must also make sure to check the repayment tenure available for the advance and the flexibility of choice offered by the lender. As these are long-term advances, the repayment duration can extend for 2 to 3 decades easily based on the loan amount availed and your repayment capacity.
Reputed lending institutions provide repayment tenure options of up to 20 years for property loan repayment. However, your choice of tenure also determines the overall affordability that you enjoy on the advance along with the LAP loan interest rate levy. Even though a tenure of 20 years may be available for repayment, it is not always wise to max out your tenure availability by selecting the longest term. This is because the tenure selected impacts the total interest accrual on your loan, with longer tenures resulting in high interest payments and otherwise.
To determine which tenure is best suited for your financial capacity and keeps the monthly instalments easily payable, you can use a property loan EMI calculator, an online tool available for loan decision assessment before borrowing.
Property loan providers also extend prepayment facilities, including foreclosure and part-prepayment of these loans at any time before the tenure ends. So, even if you have selected a long tenure, you can use any lump-sum funding available to prepay your loan and reduce your interest liability. Only that you need to select your timing for such prepayment wisely. It is wise to choose part-prepaying or foreclosing your property loan account towards the beginning of the tenure after completing stipulated EMI payments as most of the interest liability is accumulated towards the first few EMIs only. Individual borrowers do not need to pay any fees or charges to avail either of these facilities.
Loan Against Property Balance Transfer Facility
Borrowers can also transfer their outstanding property loan balance to a new lender midway during the tenure. The refinancing option is often opted for when a borrower seeks to reduce his/her LAP loan interest rate and avail other favourable terms on the advance. The facility also leaves room for availing additional credit in the form of a top-up loan available over and above the existing loan.
Even though the eligibility requirements for a property loan are simple, one should ideally hold a positive credit score of 700 or above when applying. Such a score improves his/her creditworthiness, allowing negotiation for the best rates and favourable terms on the advance.