Factors that decide your loan against property interest rates

Loan against Property is an affordable financing solution to help organize finances for various expenses. Since the loan against the property is a secured loan, the interest rates and other fees are low compared to unsecured loans, such as personal loans.

One of the most important considerations before applying for a home loan is the interest rate. This depends, among other things, on several factors, such as the CIBIL score, the property’s valuation, and the loan amount. Real estate loans are high-value loans that can be in the millions of rupees.

These are the factors that can affect the interest rates on your loan in relation to the property:

1. Credit score:

Your creditworthiness plays an important role in determining your interest rate when applying for a home loan. In general, it is recommended that you have a credit score of 650 or higher to qualify for loans at competitive rates.
However, if your credit rating is low, the lender may consider you a high-risk borrower and charge a high-interest rate. In some cases, your request may also be rejected.

2. Borrower’s profile:

The borrower’s age, occupation, place of residence, and monthly income, etc., affect the interest rate charged by the lender. As an employee approaches retirement, the lender may charge a higher interest rate, while a newcomer may get better loan deals.

Typically, a lender can charge lower interest rates to employees than to homeowners because employees have a regular and constant source of income. On the other hand, freelance candidates may be charged higher interest rates because their income is not regular. Eligibility criteria and the resulting interest rate can vary between lenders.

3. Type of property to pledge:

The type of mortgaged property plays an important role in determining the interest rate on a loan compared to the property. The interest rate may be different for commercial and residential properties since they both have different values. Also, the age of the property and its location can affect the interest rate.

4. Term of the loan:

The content of your loan is another factor in determining the interest rates on the loan compared to the property and subsequent IMEs. Please note that these loans are long-term commitments that require regular EMI for 10-15 years. The shorter the tenor, the higher the NDEs and vice versa. Some lenders may charge a slightly higher interest rate if the loan is used for a shorter term.