Tips on How to Get Cheapest Loan Against Property Interest Rate on Your Property

Tips on How to Get Cheapest Loan Against Property Interest Rate on Your Property

A loan against property is a type of secured loan. Under this type of loan, a borrower pledges their property as security. Loans against property, also known as mortgage loans, are backed by the security and therefore, involve minimal risk for the lender. Lenders, therefore, generally sanction these loans at the nominal interest rate and for tenors extending up to 18 to 20 years.

However, borrowers must know that even though they are pledging their property as security. Their chosen lender will do their due diligence before approving their loan. If a borrower does not meet the lender’s set eligibility criteria, their application will get rejected. If the applicant’s income and credit profile are not reliable and do not elicit trust. The lender may approve the loan but they will do so at a higher interest rate.

In this article, we discuss with our readers some tips that will help them get the best and lowest interest rates on a loan against property.

Make Sure Your Credit Score Is Healthy

If you are planning to apply for a property loan and want to get the best loan against property interest rates, the first thing you must do is make sure you have a healthy credit score. Any lender will give you a loan at a good interest rate only if your credit score is 750 and above.

So, how can you make sure your credit score is healthy? The answer is simple: check your credit report after every six months and if you think that the report looks bad, take corrective measures before applying. Here are a few tips on how to maintain a healthy credit score. First, keep your credit utilization ratio under 30%. Second, pay all your EMIs and dues on time. Third, keep a healthy mix of secured and unsecured loans.

Never Miss an EMI Payment

To get the best interest on a loan against property, always pay your credit card bill on time and make sure you are clearing your debts each month. Missing an EMI or a debt payment will not only attract a penalty from your lender but also negatively impact your credit score, which, in turn, will lead to difficulty in getting a loan in the future.

Make Sure You Can Show Income and Job Stability

Lenders extend their best loan offers to those who they think will pay off the loan easily and without missing any payments. Thus, before approving a loan application, lenders check the applicant’s income and employment history. Therefore, your chances of getting your loan application approve. And a decent interest rate will be quite high if you employ a government firm or a multi-national company. Employment with these employers shows a stable income and therefore, good repayment capacity.

Further, your chosen lender will also consider your job stability. If you are someone who switches jobs often, your lender will see you as someone unreliable and will not give you their best loan offer.

Keep an Eye Out for Seasonal Offers

Lenders run seasonal offers from time to time to attract new customers. If you truly want the best interest rates for your loan against property, make sure to keep an eye out for the seasonal offers. Plus, talk to as many different lenders as you can. See what different lenders are offering and choose to go with the one offering you the best loan deal.

Learn How Your Chosen Lender Calculates Interest Rate on Loans Against Property

Different lenders calculate interest rates on loans against property using different methods. Therefore, your lender may give you a very low-interest rate, and yet you may end up paying more in interest than you would have paid another lender. Therefore, you should understand how your lender calculates interest on loans.

Lenders offer loans at either a flat or reducing interest rate. In the case of loans taken on reducing the interest rate, the interest is calculated on the outstanding principal amount, which goes on decreasing, and therefore, the EMIs for such loans also reduce with time. However, in the case of loans taken on a flat interest rate, the interest is calculated on the entire loan amount, and therefore, the EMIs stay the same for such loans. Before, taking a loan against property, talk to different lenders and understand how they calculate the interest rate, and go with the one offering you the most lucrative deal.

Summing Up

If you are planning to take a loan against property, think well and think hard before taking any major decisions. You are pledging your property as collateral and therefore, you must make sure that you will be able to pay your dues each month. Most importantly, negotiate for the best interest rate. Even a decimal point reduction in the interest rate will help you save lakhs in interest. So, choose your lender carefully.

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