A loan against property is one of the most beneficial financing instruments that provides a considerable loan quantum against an immovable asset kept as collateral to lending institutions. Borrowers can either mortgage their residential or commercial assets and obtain a sizable amount as a loan.
Ways to lower commercial property loan interest rates
Every applicant must know that the interest rates vary from lender to lender. Basically, the interest rate on any loan depends on the principal amount and the credibility of the borrower.
Financial institutions offer this facility at low commercial property loan interest rates. However, there are several ways to further lower interest rates. Therefore, it is recommended to do thorough research and settle for the lender that offers the most compatible terms. However, here are some of the best ways to reduce your rate of interest for a loan secured by commercial property.
Improving the CIBIL score
Maintaining a decent credit score is one of the most significant aspects while opting for a loan against property. A CIBIL score of more than 750 is considered to be good, and lenders easily approve such applications. One can improve their credit score by clearing outstanding dues, making timely EMI payments, and consolidating debts.
Maintaining a decent financial profile
Financial institutions strictly scrutinize the borrower’s profile before disbursing the loan amount and deciding the interest rate. Applicants with a stable monthly source of income are offered loans at lower interest rates. On the other hand, self-employed individuals, apart from doctors and Chartered Accountants, have to pay higher interest rates. Lenders check the parameters, such as monthly income, age, and financial records, before finalizing the rate of interest for a loan against property.
Knowing details of the mortgaged property
A property situated in a prime location with several amenities and decent connectivity will help the borrower get a loan at lower interest rates. Further, newer properties attract lower interest rates. This is because the lending institution will be able to recover the unpaid dues easily from such properties in case of any credit default.
Opting for a shorter repayment tenor
The loan repayment tenor is another factor that affects commercial property interest rates. Borrowers can easily lower their interest rates by opting for a short repayment tenor. However, opting for a shorter repayment tenor leads you to pay higher EMIs. Hence, you should make a decision based on your financial capabilities. In this context, willing borrowers must know how to determine the right repayment tenor for a loan against property.
Moreover, borrowers can choose the option of prepaying the loan amount before their repayment date. This facility lowers the total principal loan amount, which consequently reduces the overall payable interest.
One of the most beneficial aspects of applying for tax benefits on a mortgage loan one can claim on a loan against property. According to Section 37(1), borrowers can claim tax exemption from a LAP if the loan amount is used for business purposes. Further, as per Section 24(B), salaried individuals can claim tax benefits on the interest paid for a LAP if the amount is used for purchasing a residential property.
Moreover, borrowers also see the pre-approved offers extended by leading financial institutions, such as Bajaj Finserv, on financial products like loans against property, home loans, etc. These offers simplify and fasten the overall lending process, thus ensuring a smooth borrowing experience. Potential borrowers can check their pre-approved offers by providing their names and contact details.
To sum up, a loan against property is indeed one of the most convenient credit facilities in times of financial emergency. Further, the lending institution approves this loan at low commercial property interest rates due to its secured nature.
However, one should always remember to use the borrowed loan amount prudently and borrow as much as required. This is because if the borrower fails to repay the loan amount within the repayment tenor, the lending partner holds the exclusive right to dispose of the mortgaged property and recover the unpaid dues. One can take help from an online LAP EMI calculator to know their monthly installments before applying for this credit facility.