How Loan Against Property Interest Rate Is Decided Based On Your Profile - Loan Trivia


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Wednesday 23 November 2022

How Loan Against Property Interest Rate Is Decided Based On Your Profile

property loan interest rate

A Loan against property is one of the most popular ways of sourcing a high-value loan to cater for your big-ticket expenses. This form of loan has been gaining popularity because of the low-interest rates and long-term tenors, and since the loan is already secured by collateral, which is your property, the lenders are less hesitant when approving these loans because it involves minimal risk for the lenders. When applying for a loan against property, the interest rates offered to the borrower depend on several factors, such as age, income, credit score, employment status, etc.

Here are some of the factors that decide your interest rate based on your profile:
  1. Borrowers Age:

A borrower who is young and early in his career is more likely to receive a better interest rate on property loan and better borrowing terms because a younger applicant can adhere to the long-term repayment period. A borrower who is closer to retirement can still receive a loan against property, but the interest rate offered will be much higher and the tenor period will be much shorter because lenders are hesitant about the applicant’s repayment capacity.

  1. Employment Status: One of the major aspects of a loan against property is the borrower’s employment status, because the lender wants to ensure that the borrower has a regular source of income throughout the tenor of the loan. A salaried individual will receive far better interest rates than a self-employed individual because of the income uncertainty. An employee working at a government job, an MNC, or a reputed private firm will receive better offers. 3. Income Status: If you are working at a high-paying job in a private firm, you are more than likely to receive a lucrative property loan offer because lenders want to ensure the applicant is able to repay their debt on time without defaulting on their monthly installments. It is important to file your Income Tax Returns (ITR) and maintain a healthy financial background at the time of applying, because an applicant with an unstable source of income will receive higher interest rates or may even be rejected. 4. Credit Score: In India, a credit score is known as the CIBIL score, and the purpose of the CIBIL score is to establish the individual’s financial capability. Your score is based on your existing loans, credit card dues, education loans, and if you have ever defaulted on your monthly payments. Maintaining a healthy CIBIL score above 750 is important because a higher score ensures that you receive beneficial loan options, lower interest rates, and a higher loan-to-value ratio. A higher CIBIL score reflects on your past payment records and that you have paid your financial obligations responsibly.

  1. Documentation:

When you’re applying for a loan against property, you will be required to submit a prescribed set of documents, such as:

1. KYC Documents such as Aadhaar Card, Passport, Pan Card, Ration Card

2. Income Proof Documents such as the latest salary slips and financial statements for the past 6 months 

3. Address proof of the applicant such as your electricity bill, property tax receipts 

4. Income tax returns for the past 3 years and Form 16

5. Documents for the property that is to be pledged such as your Title Deed 

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