What Are the Factors Affecting Loan Against Property Rate of Interest And How to Get Better Rates

Posted on 11 June, 2021 by Hero FinCorp

Loan Against Property (LAP) is also known as mortgage loans where the property assets are used as collateral for availing loans.

Factors Affecting Loan Against Property Rate of Interest:

Beyond the usuals like tenure duration, loan amount, and CIBIL score, there are few more unique factors affecting LAP interest rates.

● Loyalty Program:
If you have already availed multiple loans in the past from the same lender (banks or NBFCs), while maintaining a good CIBIL score, then the lender may give you a special discount on the interest rate. There may be special criteria or different levels of applicable discounts. Some banks also offer discounts if you have multiple accounts on the same bank or the borrower’s spouse has an account on that bank too.

● In addition to the incentives that you might get for using only one bank, applying or having loans from multiple banks is an oversight. Having multiple loans from multiple banks will decrease the CIBIL score which in turn can increase interest rates (if not get the loan rejected).

● Tenures like 3 years, 5 years, and 10 years (which are the tenure that loans are commonly availed for) may have reduced interest rates by banks/NBFCs (Non-Banking Financial Companies) to entice borrowers.

● Similarly, loan amounts may also carry special interest rates depending on the range specified by the financial institution. For instance, loans from Rs. 10 to Rs. 15 Lakhs may have less interest rate discount than loans from Rs. 20 to Rs. 35 Lakhs.

● The condition of the property, type of property, location, as well as age of the property will also affect the rate of interest.

Benefits of Loan Against Property (LAP):

● As of February 2021, the Loan Against Property Rate of Interest has been reduced by 0.7%, which makes it a very good time to avail of these loans.

● Furthermore, Loan Against Property can be availed without income proof in certain banks and NBCFs. This can be done by getting a co-applicant with a good CIBIL score. This can also lower the interest rate.

● While not recommended, multiple LAP can be taken on a single property. The limit and restrictions vary from lender to lender.
● Mortgage loans interest rates are very competitive as it is a secured loan with permanent collateral, the interest rates in the market range from 7.20% to 13.05%.

● Most banks consider a CIBIL score of 650 good, while scores lower than this can still be approved in some banks with higher Loan Against Property Rate of Interest.

Loan Against Property - Frequently Asked Questions (FAQs):

● What are the usual processing fees?
The usual processing fees range from 0.5% to 1% of the loan amount.

● Can I apply for as much loan amount as I feel like?
The loan amount will be dependent on property value, CIBIL score, income, etc. The lender will define it before loan approval. Applying for more than the eligible amount will result in application rejection.

● The maximum duration of tenure?
While the minimum duration of tenure ranges from 1-3 years, for most banks and NBFCs, the maximum duration of tenure ranges from 15-20 years.

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