Loan Against Property Tenure: Decoding Key Factors

A loan against property tenure is a popular secured loan for many Indians. You can get it by offering your existing property as collateral to lenders.

You can get a loan usually between 40-70% of the property’s value. You can use residential or commercial properties as collateral if you have the necessary documents.

You can choose the loan term based on your ability to repay. However, several factors affect how much you can borrow against your property’s equity, so consider them before choosing a loan term. If you’re considering getting a loan against your property, keep a few things in mind.

Top factors you should keep in mind

1. Amount of loan against property

The amount of the loan you need has a significant influence on the loan’s duration. Usually, a higher loan amount corresponds to a longer loan term.

The extended repayment periods can provide you with the flexibility to pay off the loans with ease, as the EMIs are lower since the loan amount is stretched over an extended period.

2. Your credit score

The crucial factor that impacts not only the interest rates on your loan against property but also your eligibility for it is your credit score. You need a credit score of 750 or above to obtain competitive interest rates.

A low credit score may label you a risky borrower, causing lenders to charge you higher interest rates. Moreover, if your credit score falls below the minimum requirement, your loan application may get rejected.

3. Profile of the applicant

When considering Loan against property tenure, your borrower profile is an essential factor to consider. Your age, employment status (salaried or self-employed), location, monthly income, and other aspects can impact the interest rate you’ll be charged.

For instance, if you are a senior citizen close to retirement, lenders may charge you a higher interest rate than a young, fresh employee.

Additionally, the nature of your income source can also play a role. Lenders may be cautious about extending a loan against property or charging higher interest rates if your income is irregular and unpredictable.

4. Age of the borrower

The borrower’s age is crucial when getting a loan against property. If the borrower is close to or has already reached retirement age, it could lead to loan application rejection.

However, in such circumstances, one can opt for loans with a shorter term, which will result in higher EMIs and sometimes house mortgage loan interest rates.

A borrower’s age affects their ability to repay the loan due to the reduced income flow or the absence of a steady income source during retirement.

5. Loan’s term

The EMI you choose significantly impacts determining the duration of your home loan. Opting for a low EMI will lead to extended loan tenure, while a higher EMI will result in a shorter term. A shorter tenure enables the borrower to save a considerable amount on interest payments, while a longer tenure offers the benefit of lower EMI payments.

6. The interest rate on the loan

Assuming the mortgage loan amount and interest rates remain unchanged, the mortgage EMI varies based on the interest rates. Lower house mortgage loan interest rates translate to a lower EMI. Additionally, borrowers can request that their lender increase the EMI to shorten the loan tenure.

7. Previously rejected loan applications

Financial institutions and credit brokers maintain records of previously declined loan applications. If your loan application is turned down, it can negatively impact your credit report and reduce your chances of getting a loan. Therefore, applying for loans only when you have a genuine need and avoid unnecessary applications is crucial.

Conclusion

While several other factors play a role in loan against property tenure, the aspects mentioned above are crucial when determining the ideal home loan tenure. If you have sufficient funds to pay a slightly higher EMI each month, it’s advisable to opt for a shorter loan tenure.

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Frequently Asked Questions

Q1: What factors influence the tenure of a Loan Against Property?

A: Several factors impact the LAP tenure, including your loan amount, financial health, and the lender’s policies. Generally, lenders offer tenures ranging from 5 to 20 years.

Q2: Can I choose any tenure for my Loan Against Property?

A: Lenders usually provide a range of tenures, giving you some flexibility. However, the final decision often depends on your financial stability and the loan amount. Longer tenures may have lower monthly payments but result in higher overall interest payments.

Q3: How does the loan amount affect the tenure?

A: The loan amount and tenure are inversely related. Larger loan amounts might lead to longer tenures and vice versa. Assess your repayment capacity to find the right balance.

Q4: Does my credit score impact the tenure of a Loan Against Property?

A: Yes, your credit score plays a crucial role. A higher credit score often allows for more favorable loan terms, potentially enabling you to choose a shorter tenure with lower interest rates.

Q5: Are there prepayment options to shorten the tenure?

A6: Yes, many lenders allow prepayment. By making additional payments, you can reduce the outstanding principal, effectively shortening the tenure and saving on interest costs.