In the past, people often avoided taking loans, opting instead to save diligently over many years to achieve life goals like funding a child’s education, a wedding, or building a home. But now, taking loans can help you achieve your financial goals faster and more efficiently. One such advantageous loan is the loan against property.
Whether you need funds for personal or business purposes, this loan can provide the financial boost you need. However, securing a favourable loan against property interest rate is crucial to minimise your repayment burden. Here we discuss some essential tips to help you achieve that:
1. Highlight Your Income Stability
Lenders offer favourable interest rates to borrowers with stable and high incomes. Ensure you provide complete documentation of your income and employment history to demonstrate your repayment capacity. This includes salary slips, bank statements, and income tax returns. Highlighting bonuses and additional income can further strengthen your application.
2. Opt for a Shorter Tenure
While longer tenures reduce your monthly EMIs, they increase the overall interest paid. Choosing a shorter tenure can help you secure a lower interest rate and reduce the total interest burden. Additionally, shorter tenures may attract lower interest rates as they pose a reduced risk to the lender.
3. Maintain a Good Credit Score
A high score demonstrates your creditworthiness and reduces the risk perceived by the lender.
Ensuring your credit score is above 750, that makes you eligible to get the best interest rate. Regularly check your credit report for any errors.
4. Use Your Property’s Market Value to Your Advantage
Your eligibility rating is important in determining loan approval and interest rates, but the value of your property can also impact the interest rate offered. In some cases, lenders might offer a slightly lower interest rate for loans secured by properties with higher market values. This is because they perceive these loans as less risky.
5. Choose the Right Type of Interest Rate
Loans against property can come with fixed or floating interest rates. Fixed rates remain constant throughout the tenure while floating rates can change with market conditions. Assess your risk tolerance and market trends before choosing the type of interest rate. Fixed rates provide stability, whereas floating rates can offer lower initial rates but come with variability.
6. Keep Your Debt-to-Income Ratio Low
Since a lower debt-to-income ratio indicates that you have sufficient income to manage your loan repayments, lenders prefer borrowers with a low debt-to-income ratio, usually below 40%. So, aim to reduce your existing debts before applying for a loan against property.
7. Make a Larger Down Payment
A larger down payment reduces the loan amount, which in turn lowers the lender’s risk. This can often result in a more favourable interest rate.
8. Compare Offers from Different Lenders
Different banks or lenders offer different interest rates based on their policies. Compare different offers from multiple banks and financial institutions to find the most competitive rate. Utilise online loan comparison tools and consult financial advisors to understand the nuances of each offer.
Conclusion
Securing a loan against property at a low interest rate requires strategic planning and thorough research. Finding the right lender becomes crucial. Banks like IndusInd Bank have attractive loans against residential and commercial properties, which can help you unlock the hidden value of your property. Their loans against property have flexible repayment terms of up to 20 years and convenient doorstep services. To learn more visit IndusInd Bank.
