Loan against property (LAP) has for many decades been a popular source of funds for the property owners, whether it’s a residential, industrial or commercial one, or even for plots. LAP enables you to leverage this immovable asset in the form of property to get the required funds without losing the ownership of the asset. Also, the secured nature of LAP further allows lenders to offer lower interest rates besides longer tenures of up to 15-20 years. Given that loan against property is generally a big-ticket loan, availing it at lower interest cost by striking the best deal as per loan against property eligibility is what assists borrowers in lowering their overall interest cost. And to avail of a loan against property at low-interest rates from Axis bank loan against property, it becomes a prudent move to understand and follow some financial tips before submitting a loan application.
Compare the interest rates of as many banks or financial institutions or lenders as possible
Given that loan against property is a product that gives lenders the right to recover outstanding loan amount from the auction of pledged property in case of loan default, such secured nature of Axis bank loan against property often results in lower interest rates due to lower risk involved for the lender, vis-a-vis options like personal loans. But remember that the rate would also depend on the lender’s credit risk assessment of the borrower’s credit profile, repayment capacity and pledged property’s characteristics like location, type and age of the property, etc. The loan against property rates may also vary depending on the loan amount and repayment tenure chosen. When assessing your loan against property eligibility and deciding to take LAP, borrowers must always ensure to thoroughly compare the rates and other factors like tenure, LTV ratio, amount, processing fees etc., before going ahead in order to strike the most suitable deal with the right lender.
Be credit ready with a high credit score
It’s been a decade or so since credit score’s role and importance in both the approval and setting of lending rates has gained prominence, even for loans against property. Lenders are increasingly factoring in applicants’ credit scores when evaluating loans against property eligibility. In fact, some have even begun risk-based pricing, wherein lower interest rates are offered to those having good credit scores, whereas those with no or low credit scores are offered relatively higher interest rates, or their application may even get rejected. So, it becomes prudent for all prospective loan applicants to ensure to build and maintain a high credit score in order to enhance their eligibility when availing the required funds by applying for Axis bank loan against property.
Select a lower LTV ratio if possible
When availing loan against property, as per the loan against property eligibility criterion of lenders, it is usually offered with LTV of round 50-75% of property’s cost as loan. In fact, the higher the LTV ratio chosen, the higher the loan amount and EMI, hence higher the risk involved in big-ticket loans. Moreover, lenders may even tred cautiously when offering a relatively high LTV ratio to applicants, as it would imply higher risk due to higher loan amount. Some lenders like Axis bank loan against property even offer lower interest rates for those opting for a lower LTV ratio, thus making it even more imperative for prospective borrowers to go for a lower LTV ratio, if possible. Go ahead with the LTV ratio, whose corresponding loan amount as per pledged property is enough to satisfy the required funds. Never opt for a higher LTV ratio than required, as the higher the loan amount, the higher the overall interest cost as well.
Check with the existing bank/HFC first
Another pivotal factor to keep in mind for striking the best deal with a low-interest rate as per your loan against property eligibility is to check both the product features and offers provided by lenders with whom the individual has existing customer relationship, such as current, savings, salary or deposit accounts, existing loans or credit cards. Many lenders tend to offer preferential terms, rates, etc., to existing customers, given that they already have the repayment history, KYC and other relevant information of that customer. Moreover, knowing the offer available from such lenders helps in comparing the same with other prospective lenders, and then accordingly make an informed choice for the most suitable deal for one’s financial requirements and as per eligibility.
Qualify for lender’s eligibility criterion
Prospective applicants who are able to qualify for loan against property eligibility criteria like minimum income, age, credit score, repayment history and capacity, etc., usually have higher chances of availing lucrative interest rates v/s those who face difficulty in qualifying for such eligibility criteria. For instance, some lenders may offer lower interest rates to borrowers who have high income, low LTV ratio requirement, good credit score and live in a metro location. As those fulfilling all such criteria of eligibility for the lender tend to be looked at as more favourable according to the set credit risk assessment parameters, prospective applications for Axis bank loan against property should also scout and opt for the loan offer and lender whose eligibility criterion is satisfied to the most extent. This would enable the borrower to strike the right deal and boost the loan against property approval chances.
Be wise when choosing loan repayment tenure
Another crucial factor tha you should keep in mind when you get to qualify for a loan against property eligibility is to choose the LAP repayment tenure according to your repayment capacity, which includes your income, other EMIs, expenses etc. As the loan’s repayment tenure is generally up to 15-20 years and varies for different lenders, remember that choice of tenure plays a vital role in determining the EMI outgo as well as total loan cost. Go ahead with the tenure which suits your repayment capacity and whose corresponding EMI is most comfortable to repay every month without stressing your finances too much. Choosing a longer repayment tenure leads to lower EMIs, but it also results in higher overall interest costs. Whereas on the flip side, shorter repayment tenure involves bigger EMIs, but overall lower interest outgo. If one goes for shorter tenure, an aggressive repayment schedule may harm financial health due to the high EMI amount outgo. Thus, go ahead with long repayment tenure to get the benefit of smaller EMIs, and later make prepayments whenever you have surplus money in order to reduce overall interest cost.