Property loans are high-value advances, which puts an immense financial responsibility on the borrower. If not borrowed prudently, the cost of the loan can pile up, creating huge liability challenges to manage. One of the smart ways to avoid landing in this situation is to select a suitable interest type. In this context, let’s understand what an interest rate on loan against property means and its impact on the borrower.
Meaning of fixed interest rate:
The fixed rate of interest is a levy system that is applicable to all types of loans, including loans against property. It denotes that the interest computed is based on a fixed rate levy determined during loan sanction and approval. As this rate remains constant throughout the tenor, any change in market trends does not affect it.
When you avail a LAP, you get the option to choose between fixed rate levy system and its alternative floating rate. Calculating interest based on this system is simple due to consistent rate levy. However, a fixed system of rate levy keeps the interest rate on any loan a notch higher than the floating rate.
In the case of loan against property, this can make a huge difference in the repayment liability due to the high financing quantum involved. It is thus wise that you consider market trends and compare lender rates before finalising your property loan.
Along with the interest rate levy, you must consider other factors as well when availing financing, like the loan against property eligibility requirements, paperwork, etc. All of it combined should help make a wise borrowing decision.
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