20 APRIL, 2022

You can need funds urgently anytime. While you can borrow from friends and family, it is not always feasible. You might not get a sufficient amount and it could also impact your relationship. However, with a loan against property, you can get funds without selling off your assets or borrowing from family. It is easy to avail and offers competitive interest rates. However, it is prudent to review its interest rate closely as it impacts your monthly repayment amount. While you choose the lender to avail the loan, you must know how your interest is determined and how you can get the best loan against property interest rates.


What is loan against property?

A loan against property is a secured loan offered by banks and financial institutions. To avail this loan, you can mortgage a residential or commercial property. In short, you can pledge your property as collateral to avail a loan against it. The loan amount offered is generally 60%-70% of the value of the mortgaged property.


A loan against property can be availed for a wide range of purposes and needs, including business expansion, funding your child’s education, or financing your dream vacation. When you avail this loan, while the documents are with the lender, you can use the property as per your needs.  The amount depends on the value of your property and your repayment capacity, which is determined by factors like age and income levels. Most lenders offer LAP at floating rates.


Factors determining loan against property interest rates


The lender determines your loan against property interest rates based on the following factors:


  • Your employment status

If you're a self-employed professional or businessman, you could be charged more than an applicant who is employed with a company and drawing a regular salary. It is because self-employed professionals could have inconsistent monthly incomes and could default on EMIs.


  • Your credit score

Your credit score has a significant impact on your interest rates. The lower your credit score, the higher your interest rates could be. You must check your credit score before applying.


  • Age

Older applicants are often charged more interest rates. It is because a higher age tends to impact repayment capacity. Younger applicants have more earning years and can have progressive increases in their monthly income.


  • Tenure

The longer the tenure of your loan, the lower will be your monthly installments. However, the longer tenure you opt for, the higher would be your interest outgo.


A loan against property is one of the most convenient means to arrange funds instantly. Such loans are disbursed fast, are easy to apply, and are convenient. However, an increase or decrease in your credit score can impact your rate of interest. Therefore, you must review your credit score to get an affordable loan against property.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.