June 10, 2023

A LIC Loan Against Property can be used to meet a variety of financial needs. It can help you with anything, from purchasing a new home to starting a new business. However, before you apply for an LIC Loan Against Property, it is very important to understand the factors that influence the loan against a property interest rate.

The top ten factors influencing your LIC Loan Against Property interest rate

1. The applicant’s age: Age is an important factor in determining loan tenure, amount, interest rate, and whether your application will be approved. If you are young, you may expect to get approved for a larger loan amount and a longer repayment period. Being young doesn’t always mean that you will get a higher loan amount as you have yet to establish a credit history and fully understand your financial responsibilities from the lender’s perspective. The uncertainty of your financial behaviour at a young age will fetch you a high-interest loan. Similarly, if you are a retiree, you may have to pay a high-interest rate in the future due to low earning potential. You are more likely to have a solid financial history and a stable career if you are between the ages of 30 and 35. As a result, the lender may provide you with a low-interest loan if you fall in this age range. 

2. External factors: External factors such as the Reserve Bank of India’s (RBI) monetary policy, inflation, and economic growth rate can all have an impact on interest rates.  If inflation continues to rise, the RBI will reconsider its monetary policy. It raises the CRR and the repo rate, which makes borrowing more expensive. The RBI takes this step to keep prices in check by restricting the economy’s cash flow. Simply put, if the economy suffers a setback, the cost of obtaining a property loan rises.

3. Relationship between a lender and a borrower: Even in the digital age, your relationship with the lender can influence the interest rate you will get at the end. The longer the relationship, the more understanding and trust the lender has in you. If you already have an account with the lender and pay your bills on time, you may be eligible for a lower interest rate.

4. Property type: Your interest rate is also affected by the property you are willing to pledge for. Real estate properties are classified into two types: commercial and residential. Commercial property includes office buildings, factories, and manufacturing units. Residential property, on the other hand, can include houses, apartments, and residential land. You can expect an affordable loan by pledging your commercial property if it has clear ownership and does not belong to any investors. This is due to the fact that commercial properties are typically located in upmarket areas. They are also more valuable and easier to sell in the event of a default. By approving the loan on such properties, the lender assumes a low credit risk. 

5. The property’s location: That location is crucial in determining the resale value of your property. Properties with a higher resale value significantly reduce lending risk. The lender will grant you a lower interest rate if your property is in a prestigious location with all basic amenities within a one-kilometre radius. Rates will be higher if a property is located on a city’s outskirts. Similarly, if you are pledging a rural property, the lender is less likely to approve your home loan application.

6. Loan term: The repayment term is critical in determining the interest rate on your home loan. Your EMI which you can calculate using Loan against property calculator includes both the principal outstanding and the interest amount. During the first few years of repayment, the interest component accounts for the majority of your payments. However, as time passes, you begin to contribute more to principal repayment. 

7. Loan amount: The loan amount has a significant impact on the loan interest rate. If you request a larger loan amount or the lender grants you a high Loan-to-Value (LTV) ratio for LIC Loan Against Property, you can expect a high interest rate. This is due to the fact that a larger loan amount entails higher credit risk and vice versa.

8. Interest rate type: When applying for a loan against a property, you can choose between a fixed and a variable interest rate. To understand which one is better, you can use loan against property calculator.  The lender determines the fixed interest rate. Floating rates, on the other hand, are determined by the RBI’s benchmark. The floating rate is subject to quarterly adjustments and is typically 1% to 2% cheaper than fixed interest rates.

9. Your earnings: Many people believe that having a high income is not required when applying for a LIC Loan Against Property. They believe this because the funds are secured against collateral. However, this is only partially correct. 

10. Job: Borrowers who frequently change jobs have a more difficult time obtaining low-interest loans. The same is true for business owners. Job changes on a regular basis indicate that your career is still in flux. It also suggests that you may have difficulty repaying your loan in the future. In addition, the lender takes into account your employer’s credibility. Working for a start-up or small business with an inconsistent salary qualifies you for a loan against property calculator secured by real estate.

What are considered for a Loan against Property Amount

A Loan against property calculator is an online tool that allows for the simple calculation of monthly payments for loans secured by real estate. It is always a good idea to double-check your liabilities before applying for a loan against property, which is where this tool comes in handy. It assists you in calculating the monthly instalment by taking three factors into account:

Loan principal: The maximum loan amount for a property loan can be up to 90% of the property’s market value. If the asset is worth Rs. 50 lakh, the resulting principal sum cannot exceed Rs. 45 lakh. In most cases, the maximum loan amount is 80% of the property’s value.

Repayment tenor: The repayment term over which the credit will be repaid. Loans with a high value, such as loans against property, have greater repayment flexibility. One can choose to repay the loan over a period of up to 18 years. 

Interest rate: The final factor required for a Loan against property calculator to function is the interest rate applicable to the loan. This rate is determined by a number of factors, including the borrower’s eligibility and market conditions.

So we are saying, 

By concentrating on the aforementioned factors, you can increase your chances of obtaining a low-interest loan against a property. These factors help to improve your repayment potential.