8 Factors Affecting Interest Rates on Loan Against Property

A loan against property enables one to avail considerable loan amount to fund big-ticket purchases. One of the significant considerations while availing of the credit option must be the interest rate of loan against property, as the affordability of the borrowing hinges on it. 

Factors affecting loans against property interest rates

Besides knowing what is a loan against property, one must know the following factors that affect property loan interest rates:

1. Applicant’s age

Borrowers’ age influences property loan interest rates. Individuals nearing retirement age have questionable repayment capacity and are charged interest rates. 

2. Income status

Borrowers’ monthly income has a bearing on the LAP loan interest rates. Individuals with stable income status are offered lower interest rates. 

3. Employment history

Individuals with a credible and long employment history are considered to have the financial stability to repay loan amounts on time and hence can fetch lower interest rates. 

4. Loan tenor

A shorter loan tenor will help individuals with lower interest outgo and help in saving the cost of borrowing. Individuals can use a property loan calculator to choose a suitable loan tenor. 

5. Property type 

Different loan against property interest rates is charged for residential and commercial properties as both have different market values. 

6. Property Location

Property in a pristine condition will attract a lower interest rate than one located in a less desired neighbourhood. 

7. Loan quantum 

Higher loan amounts will attract higher interest rates as lenders have more credit risks attached. Using a LAP EMI calculator will help one decide on the loan amount. 

8. Interest type

Fixed interest rates remain constant throughout the loan tenor. On the other hand, floating interest rates are subjected to quarterly revisions.

To sum up, individuals must be aware of the aforementioned factors that influence the interest rate of a loan against property, as the loan expenditure is dependent on it. 

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