By A loan against property (LAP) is one of the easiest ways to get a lump sum loan to meet an impending big-ticket expense. Being a secured loan, lending institutions offer this at a lower interest rate than unsecured alternatives. However, there are certain factors that significantly influence the interest rate of this credit facility. Individuals need to stay aware of all these aspects. It will help them negotiate with their lenders for an attractive interest rate on their loan amount.
Influencing Factors of A Loan Against Property
Following are the aspects that can help individuals get a loan against property at a significantly lower interest rate:
- Property condition
In order to get a loan against property at a lower rate of interest, individuals need to ensure that the property they will mortgage is in good condition. Apart from this, properties in an area with effective communication also get an attractive interest rate. This is because all these enhance the resale value of the asset.
- Employment of borrowers
Individuals with employment in public or private organisations have a stable income. Therefore, lenders deem these salaried individuals as less risky customers than self-employed individuals. Therefore, they agree to sanction loans against property at an attractive interest rate to salaried customers.
- Healthy credit score
Credit score is also one of the major aspects lending agencies carefully examine before determining the interest rate for a customer. They approve a loan with a lucrative borrowing rate if customers have a good CIBIL score. This is because a credit score like this reflects the borrower’s positive loan repayment record.
- Loan-to-value ratio
In a LAP, individuals need to mortgage a property. They get a credit against the current value of that asset. However, borrowers get up to 75% of their current market price as a loan (which may vary across lenders). This percentage is referred to as the loan-to-value ratio. Individuals can negotiate for an attractive interest rate if the asked loan amount is less than the LTV permitted amount.
All these factors can help individuals get their loan against property at a lower interest and reduce their cost of borrowing.
In this regard, individuals need to know that one of the major advantages of a loan against property is that it comes with no restraint of end-usage. Borrowers can utilise this capital to meet any of their financial obligations, such as children’s education, family expenses, etc. It can also be an easy alternative to education loans for abroad.
There are multiple advantages of taking a loan against property to meet the long ticket expense of studying abroad. Education loans come with multiple checklists making their availability difficult for students. Further, the education loan schemes offer a loan amount that may not be sufficient for meeting expenses abroad. To avoid this, parents can apply for a loan against the property as it comes with multiple benefits.
Why can LAP be a suitable option for students?
Following are the advantages individuals can get by opting for a loan against property for studying abroad:
- No end-usage restriction: Individuals can meet any of their expenses, such as lodging, buying books, food, etc., as it comes without any restriction of end-usage. Nevertheless, students need to know how they can manage finance proficiently while studying abroad to cut down expenses.
- Easy availability: Individuals can get these loans easily by mortgaging their property and completing all the paperwork.
- Sizeable credit: Individuals can get a sizeable amount of credit with this education loan on the property to meet all their expenses.
- Long tenor: A loan against property gives borrowers a longer flexible loan tenor to repay their loans. In this regard, parents/guardians applying for a LAP for study loan purposes can utilise an education loan calculator to determine a befitting tenor. This will help them select an instalment amount under their financial capacity.
This way, LAP can be the most advantageous option as a study loan. However, individuals need to know what should they do to apply for a loan against property.
Borrowers needing capital for their long-ticket expenses can also accept the pre-approved offers extended by major financial institutions on their products, such as LAP and home loans. Accepting this offer, they can significantly expedite their loan application process. Applicants just need to mention their names and contact details to check their pre-approved offers.
In conclusion, being a secured credit facility, individuals can get loans against property at an affordable interest rate. This helps them keep their EMIs within their repayment capability, making loan repayment much more convenient.
