One of the safest and most common loan products among borrowers is a loan against land, also known as a mortgage loan. Are you curious as to why? Why not, right? With this secured loan, you will hold your commercial or residential property as collateral with the lender. That is, you can continue to own your home without ever having to worry about bailiffs showing up at your door! If you can’t pay back the loan, sell the house and get a settlement. This guide provided by Nationlearns will explain the various factors that influence the interest rates on your loan against the land.
1.CIBIL Score: Your CIBIL or credit score is the most important factor that will affect not only the interest rates you earn on your LAP loan but also your loan against property eligibility. To qualify for favorable interest rates, you should have a credit score of at least 750. If you have a low credit score, lenders will consider you a high-risk borrower and charge you a higher interest rate. Furthermore, if your credit score is significantly below the necessary threshold, your loan application can be turned down.
2.Borrower Profile: Your profile as a borrower is another big determining factor for your loan against property interest rates. Your age, whether you are salaried or self-employed, where you live, your monthly salary, and other factors can all influence the interest rate you are paid.
3.The Mortgaged Property: The mortgaged property will also decide the interest rates paid on your loan against property, which means that lenders will want to know the type of property being mortgaged, as well as its location, age, and condition.
4.Loan Duration: The length of time you take out a loan against your property will affect the interest rate you pay. LAP loans are long-term obligations for which you must set aside a set amount per month in the form of an EMI (principal loan amount + interest). Obviously, the shorter the loan term, the higher the EMI amount you’ll have to pay. If you apply for a shorter term than a longer-term, lenders can charge you a higher interest rate.