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Going for a Loan Against Property? Know the Factors That Can Affect Your Interest Rate!
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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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It is normal to face sudden expenses. In such cases, not everyone prefers to use their savings to take care of these expenses, especially if it involves a high amount. One effective option to tackle these expenses is to apply for a loan against property. This loan can be applied for by pledging property as collateral. For this loan, lenders usually offer up to 80% of the property cost, which can prove to be a sound financial cover.
Now, before applying for this loan, it is important to make sure that the loan can be repaid without any complications. For this, it is important to make sure that the interest rate of the loan is affordable. This is because the interest rate can have quite an impact on the loan’s monthly instalments.
So, take a look at a few key factors that influence a loan against property interest rate:
1. Repayment tenure
Many borrowers are unaware of the fact that even the repayment tenure can affect the loan’s interest rate. Some prefer choosing a short repayment tenure to clear off the loan sooner. However, do note that the interest payments are added with each EMI payment. Therefore, by cutting down the number of EMI payments, you are also saving on the interest payments of the loan. This is why lenders might charge a slightly higher interest rate on the loan against property to those choosing short repayment tenures.
2. Borrower’s profile
Before approving a loan application, lenders will evaluate the applicant’s age, occupation, monthly income, city of residence, and so on. After evaluating all these factors, the lender will set the interest rate for the loan. Do note that salaried employees are likely to get a lower interest rate as compared to self-employed individuals since they have a regular source of income, thus reducing the lender’s risk.
3. Credit record
Every lender checks an applicant’s credit record before offering them any type of loan. This is why it is ideal for every individual to maintain a credit score of at least 750 or more. Since financial institutions prefer borrowers with good credit scores, it is common for them to offer such borrowers a low interest rate for a loan against property.
4. Property type
The type of property that you pledge as collateral will also influence the interest rate of your loan against property. This is because financial institutions offer different rates for residential properties as compared to commercial ones. Do note that even the location and age of the property can have an impact on the interest rate of the loan.
These are the factors that you need to keep in mind to get a good loan against property interest rate. You can use a loan against property for any personal expense, which makes it much more flexible as compared to a home loan. Head over to the Kotak Mahindra website and apply for one now!
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