Comparing Different Lenders for Property Loan interest Rates

The Indian loan against property market is expected to register 14% CAGR to reach $857.87 billion by FY2026. These estimations come on the heels of affordable loan against property interest rates prevailing in the market.  

Presently, almost every financial institution offering a loan against property charges competitive financing costs. 

LAP interest rate at a glance

• Interest rates are starting from 7.20%
• There are two types of interest rates – fixed and floating

Moreover, borrowers may incur a processing fee of 1% or above on the principal when obtaining a loan against property. 

Note that the information mentioned above can differ across lenders. Therefore, comparing loan against property interest rates is essential to secure a favourable loan offer.

How to compare different loan offers?

Since mortgage loan interest rates vary from one financier to another, the easiest way to compare them is via interest rate calculators. 

These online devices allow individuals to enter various particulars, including the principal, interest rate, and tenor. Based on these inputs, individuals can find out details like EMI, total repayment amount, and total interest paid to compare different loan offers.

For instance, suppose a lender offers a loan against property at an 8% p.a. interest rate. For an Rs.20 lakh loan for 15 years, the EMI will be Rs.19113, and the total payable interest will be Rs.1440354. 

On the other hand, the instalment amount will be Rs.20884, and the total payable interest will come to Rs.1759318 if the same loan is availed at a 9.5% interest rate. 

Therefore, using an online calculator can help prospective borrowers find a loan offer suitable for them.

Nonetheless, merely comparing loan offers from different financiers may not be adequate to secure a loan at affordable interest rates. To that end, individuals must know the various factors impacting such rates before diving in.

Which factors impact loan against property interest rates?

Here are some points that play a significant part in deciding the mortgage loan interest rates –

• Credit profile of the applicant

The credit profile of an applicant features two aspects – CIBIL score and repayment history. Since these two aspects represent an individual’s creditworthiness, maintaining them can be helpful in interest rate negotiations. These are also factors that affect LAP eligibility.

Since borrowers with reputed credit profiles are perceived as responsible individuals, lenders may offer loans at better interest rates and favourable terms.

• Type of property and its location

Another notable factor that plays a role in determining property loan interest rates is the property’s nature and its location. Usually, the rate of interest varies depending on the residential or commercial nature of a property. It is one of the few things that one should know before applying for a LAP.

The location also plays a critical part in this regard. For instance, property at a prime location will carry better resale value. Hence, such a property owner can secure a LAP at a lower interest rate than others with properties in the outskirts.

• Loan tenor

Financial institutions review the repayment tenor when deciding the interest rate of a loan against property. Usually, a longer tenor attracts a higher interest because of the increased risk of default. On the other hand, interest rates are typically lower on loans availed for a shorter repayment tenor.

Thus, it’s essential to know how to choose the ideal tenor for a loan against property to avoid bearing the additional cost of interest payment.

• Relationship with the lender

Last but not least, an existing working relationship with a lender often helps secure a better loan against property interest rate. Since a financial institution is already familiar with a borrower and their previous dealings, they may require a little less convincing to sanction a loan at more attractive interest rates.

Leading financial institutions, besides offering attractive interest rates to existing customers, also extend pre-approved offers. These offers streamline the loan application process for them and minimise paperwork. Borrowers can check their pre-approved offers online by submitting some essential contact details.Since a loan against property is usually a long-term commitment, it is essential to select a loan offer that you can conveniently repay. In this regard, the loan against property interest rate plays an important role.