Loan against property has emerged as a popular credit facility for both salaried and self-employed individuals to meet various major financial necessities. As a secured loan that one can avail by keeping his/her property as collateral, it offers multiple benefits like higher loan amount, flexible repayment terms, faster approval, tax benefits, lower interest, and so on. However, these interest rates may vary depending on the financial institution.
Potential borrowers, who want to know more about the loan against property interest rates and its charges, keep reading.
Understand loans against property interest rates:
A LAP is one of the most popular credit facilities offered by many financial institutions at highly competitive interest rates. While opting for a LAP, borrowers must consider the interest rates and the additional charges involved in the loan. The loan against property interest rates is directly related to the amount borrowed and the loan tenor, and it varies from lender to lender and ranges between 10% and 15%.
Is there Any Additional Charge on the Loan Against the Property?
Apart from paying interest while availing a loan against property, an applicant will have to bear certain fees and charges associated with it. They include:
Processing fee
Processing fees are the administrative costs which the financial institutions bear at the time of processing and sanctioning the loan. Generally, the amount remains minimal, but it differs among financial institutions and ranges from 0.5% to 2.5% of the entire loan amount.
Foreclosure charges
Foreclosure charges or a prepayment penalty is an additional amount which a lender charges if the borrower closes the loan before the end of the tenor. Individuals borrowing loans on fixed interest rates are responsible for paying this charge. However, for those borrowing on floating interest rates, no foreclosure charge is required to be paid.
Part-payment charges
Similar to foreclosure charges, individuals borrowing a loan at a fixed interest rate are liable to pay part-payment charges. In contrast, those taking a loan with floating interest rates will not require paying part-payment charges.
EMI cheque bounce charges
A borrower has to pay EMI bounce charges if he/she fails to make the EMI payment due to any financial problem.
Statement charges
Sometimes lenders charge additional loan statement charges or separate principal and interest charges over the original interest charge.
So, these are the interest rates and charges on LAP, which may differ between financial institutions. Also, there are some crucial things which borrowers need to know before availing this loan.
In addition, there are some other factors affecting the mortgage loan interest rates that the LAP borrowers should be aware of.
Factors affecting interest rates for LAP
The two major factors that decide the loan against property interest rates are mentioned below.
- Type of property
The type of property the borrower intends to mortgage is another key factor that impacts the loan against property interest rates. The age and condition of the property, its market value and its location determine the rate of interest one has to bear.
Also, the interest rate tends to differ on both residential and commercial properties since they have different values.
- Profile of the applicant
An applicant’s profile comprises age, income, place of residence, occupation, monthly income, and other aspects that a lender judges before determining the interest rate on LAP. Typically, if the borrower is a salaried employee, he/she can expect a more competitive rate from the lender because of their fixed monthly income. On the other hand, for self-employed individuals whose income fluctuates, the interest rate is likely to be higher.
Therefore, borrowers should know the eligibility criteria required to qualify for a loan against property while deciding to apply. For a quick evaluation, one can use a loan against property emi calculator and get an instant idea about how much interest he/she has to pay for LAP.
Before availing of of this mortgage loan, borrowers can check the pre-approved offers provided by reputed lending institutions to pre-existing customers, thereby expediting the lending process. These offers include financial products such as home loans, loans against property, and more. Applicants can check their pre-approved offers just by providing their details like name and contact number. So, borrowers can understand the loan against property interest rates and its charges that they should consider while applying for LAP. Additionally, they should visit multiple websites of financial institutions and select the loan offer that matches their financial goals.
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