When you have a big expense coming up that you cannot put off, arranging finances often becomes a big problem. However, if you have property in your name, be it an independent house or an apartment, you can consider taking out a loan with this as the collateral. This kind of loan gives you substantial cash to put to use in starting your own business or addressing a medical condition or paying for education. However, such financing is viable only when you secure the minimum outgo in terms of loan against property rate of interest. Here are some tips you can use to ensure your loan comes with an attractive interest rate.
Maintain a high credit score
The first and simplest way to keep loan interest down to attractive levels is to indicate to the lenders that you are a great risk. This means, you should be able to show that you have a good record of being debt free and you have maintained all your liabilities very responsibly until now. Your credit score gives the lender this information. This is why the credit report and credit score is the first thing that any lender looks at when he gets a loan application. If the credit score is high, it indicates the loan applicant has a good history of repaying dues in a timely manner and so sanctioning the loan is a risk free decision.
To improve your credit score, you must ensure that you have no unpaid dues. Pay special attention to long standing dues and pay them off first. Ensure that all your repayments are reflecting in your credit report. Also check for errors where paid dues are showing up as unpaid. All of these can unnecessarily pull down your credit score and present you as a poor risk to lenders.
Compromise on LTV
LTV stands for Loan to Value ratio. When a lender decides how much loan he can sanction against a property, the LTV value is taken into consideration. The market value of your home is determined and then, based on several factors, the lender decides what percentage of this value they can offer as loan. The LTV offered may also depend on the overall loan value that you wish to apply for. A higher loan value will place certain restraints on LTV too.
If you insist on a high LTV, then the lender may insist on a higher rate of interest. However, if you are willing to compromise here and accept a lower LTV, your overall loan amount may be lower but your lender is more likely to offer attractive interest rates too. Using an EMI calculator for LAP (loan against property) will tell you how much monthly outgo you will take on with either option. Use it to assess how much interest you can pay comfortably.
Comparison shop lenders
Like any other product that you purchase, you can take your time to shop around for the best deals to get the best loan against property rate of interest. The marketplace has no dearth of lenders and for loans with property as collateral, you will find no shortage of offers. This is because these offer greater security to the lenders. You are in a position to do some comparison shopping between various lenders to find the one giving you the best rates. Make use of an EMI calculator for LAP to compare the overall monthly outgo if you take a loan for different lenders and then choose one whose reputation, customer service and ease of loan processing seem ideal to you. All you have to do is input the principal, rate of interest and loan term into an online EMI calculator for LAP and you have your monthly pay outs instantly on screen.
Since this kind of loan is likely to be a substantial sum, it is very important to keep the loan against property rate of interest as low as possible. This ensures that you keep your monthly financial liability within reason so you do not run out of cash for regular and necessary daily expenses. Follow the tips given above and you can identify a suitable loan against your property that you can pay off in time, without undue stress.