Facing an urgent need for funds, but don’t know what to do? Well, it is simple! There are several credit tools available in the market today, but which to choose among them is the decision that will affect your financial future. A property loan is such a tool that allows you to borrow lumpsum funds at reasonable interest rates for a longer loan tenor. The property loan interest rates may vary depending on the property pledged and several other factors. Here we shall discuss all in detail.

What is a Property Loan?

A property loan is a secured loan where a borrower borrows a certain amount of money by mortgaging a residential, commercial property, or immovable property owned by them. Here the loan amount is sanctioned once the banks appraise the property being used as collateral. Unlike business loans and home loans, a property loan can be used for business expansion and growth, home renovation, funding children’s education, wedding, medical, and any other personal requirements without restrictions. Reasonable property loan interest rates make this credit tool most popular among borrowers.

Property Loan Interest Rates

There are mainly two types of property loan interest rates available in India, they are:

Fixed Interest Rate 

The interest rate here remains the same all through the loan term. The amount of interest in the EMI decreases every month while overall EMI remains the same. This is so as the interest is calculated on the outstanding balance.

Floating Interest Rate

The floating interest rate or adjustable interest rates is where the interest rate changes over the loan tenor. Here the interest rate moves in response to changes brought about in the Reserve Bank of India’s (RBI) benchmark rate. In a fluctuating interest rate, the EMI is recalculated by the lender as per the changed rate, and it remains the same until the next rate change. 

Ways to Get Affordable Property Loan Interest Rates

High CIBIL Score – A 750+ CIBIL score shows the credibility of the borrower and his willingness to clear all debts and EMIs on time. It also gives the borrower the power to negotiate with the lender for competitive interest rates.

Profile of the Applicant – The applicant’s, age, occupation, monthly income, etc also impacts the interest rate of property loans. An applicant just a few years away from retirement will pay higher interest and EMI for a shorter tenor, while a younger person with a stable job will get a better deal. 

Property Condition – The location, age, value, overall condition, and market value of the property to be used as collateral also decides the mortgage loan interest rates. A property in a prime location with better amenities has a higher demand and resale value and lesser interest rate than an old property which is a riskier bargain for the lender.

Shorter Loan Tenor – The interest rate on a property loan is also affected by the tenor of such loans. The longer the loan tenor, the higher the risk, resulting in higher interest rates. Short loan tenors are less risky and therefore are offered lower interest rates.

Summing Up

Thus, with reasonable property loan interest rates and longer repayment tenors, property loan is one of the best credit tools for borrowers in case of an emergency.