A loan against property is among the more unusual but dependable forms of financing that has been around for a while for property owners. Property owners can benefit from a different type of financing by obtaining loans that are secured by their homes, places of business, factories, or even particular plots of land. The best part is that a HDFC Loan Against Property allows the asset’s owner to maintain control over the moveable asset while using it as leverage to obtain the needed loan amount. Sounds great, right?
Lenders can also offer relatively low interest rates on loans secured by property, as well as longer loan terms of up to 15 to 20 years with lower EMI payments, thanks to LAPs being secured in nature.
So, if you own a property or plot, it is essential that you follow these guidelines in order to improve your chances of getting a SBI loan Against Property approved, regardless of whether you need the money for personal or professional use.
Check the offer/deal of current lender
It is always advisable to review the product features and offers given by financial institutions with which you already have an existing relationship as a customer, such as savings or current accounts, fixed/recurring deposit accounts, existing loans, and/or credit cards, in order to negotiate the best deal with a low interest rate in accordance with your LAP eligibility.
Due to the fact that they already have your repayment history, Know Your Customer (KYC) information, and other necessary information for financing, many lenders can offer preferred terms, lower HDFC Loan Against Property interest rates, etc. to their current clients.
Be wise when deciding the tenure
Whenever you are eligible for a lower LAP interest rate, you must take a decision that is frequently overlooked in SBI loan Against Property applications. Lenders assesses your ability to repay a loan by considering factors like your income, other EMIs, expenses, etc., which are important to determine the best loan term. Consider the loan’s repayment period, which can range from up to 15-20 years for different lenders, when calculating the EMI payment and total loan cost. Choose a term with a monthly payment amount that won’t put an undue strain on your finances, an EMI that matches your ability to repay, and a repayment schedule that matches your ability to repay. Although EMIs are reduced with a longer repayment period, the overall cost of interest rises.
On the other hand, a shorter tenure translated into relatively higher EMIs but at the same time, a lower overall interest cost too. An aggressive repayment schedule may be detrimental to one’s financial situation if a shorter term is chosen due to high EMI costs. To get lower EMIs on a loan using real estate as collateral, choose a long repayment period. Always prepay to reduce your overall interest rate is the next step.
You should be able to compare interest rates from as many lenders as possible
Due to the fact that HDFC Loan Against Property is a secured instrument, in the event of a loan default, lenders have the option of recouping unpaid loan amounts through the sale of pledged property. Due to a lower level of risk for lenders than with unsecured options like personal loans, this secured SBI loan Against Property frequently translates into lower interest rates for borrowers.
However, keep in mind that the interest rate will also depend on the lender’s evaluation of the borrower’s credit history, ability to repay the loan, and features of the pledged property, such as the property’s location, type, and age, among other factors. The interest rate for loans secured by real estate may vary depending on the borrower’s decision regarding loan size and repayment period. Before deciding to take out an LAP, be sure to carefully compare the rates and other features offered by as many lenders as you can, including tenure, LTV ratio, amount, processing fees, etc. After that, you will be able to bargain for the best terms with the best lenders.
Try your best to meet the lender’s eligibility requirements
Candidates are more likely to receive a favourable interest rate offer than applicants who struggle to meet the criteria for a HDFC Loan Against Property, such as the minimum income, current age, credit score, history of past repayment, and capacity.
For instance, lending institutions frequently charge lower interest rates to borrowers with high incomes, low LTV ratio requirements, good credit scores, and addresses in urban areas. Prospective borrowers looking for a loan against property should look for and select a loan offer and financial institution whose eligibility requirements are most completely met as those who do tend to be viewed more favourably in accordance with established credit risk assessment parameters.
Have a good credit profile
Even for loans supported by real estate, the use and significance of credit scores in loan approval and rate setting have grown significantly over time. Lenders are increasingly taking applicants’ credit scores into account when determining a property’s eligibility for a loan. In fact, some lenders charge higher interest rates to borrowers with good credit than they do to borrowers with bad credit, who may even have their loan applications denied. This is because some lenders use risk-based pricing, which favours borrowers with good credit over those with bad credit.
Reduce the ratio of your LTV
As you finalise your SBI loan Against Property in accordance with the eligibility requirements of the lenders, keep in mind that because the loan is secured, the LTV typically ranges from 50% to 75% of the value of the property. Big ticket loans are riskier in terms of eligibility and credit risk the larger the loan amount and EMI, as well as the higher the LTV ratio chosen.
Lenders frequently decide to exercise caution when extending a relatively high LTV ratio to applicants because doing so would involve a higher risk due to the larger loan amount. Potential borrowers should choose a lower LTV ratio whenever possible because doing so might result in lower interest rates from lenders like HDFC Loan Against Property, who offer allure loan against property interest rates to those who choose to do so. Use only an LTV ratio if the matching loan amount is sufficient to cover the required sum of money. Avoid choosing an excessively high LTV ratio if at all possible because doing so will increase the loan amount and, as a result, the cost of the LAP’s interest rate.
