Loans against property are a type of secured financing. In these types of loans, a borrower borrows money against a collateral. Residential and commercial properties or a piece of land can serve as collateral in the case of these loans. Loans against property are considered low-risk loans by lenders as the lender can legally sell the pledged property for loan recovery if the borrower fails to repay their loan on time. Thus, the risk involved for a lender is almost minimal. For this same reason, loan against property interest rates also tend to be on the lower side. Currently, the loan against property interest rates starts from 8.50% per annum. However, not everyone gets offered the lowest interest rate. Loan against property interest rates can go up to 18% per annum. Here are a few quick tips on what borrowers can do to avail of a property loan at the lowest interest rate possible.

1. Pledge a High-Quality Collateral 

When it comes to loans against property, the quality of the collateral matters a lot. A property with high resale value will compel lenders to offer you the lowest interest rate possible. Thus, a borrower pledging a centrally-located flat in a modern society with all amenities, such as a swimming pool and kids’ play area, will certainly get offered a lower interest rate than someone pledging an old property located on the outskirts. So, pledging a high-quality, high-value collateral is crucial.  

2. Maintain a High Credit Score 

Whether you are applying for a home loan or a loan against property, all lenders will check your credit score before deciding on your loan application. The credit score is important as it is reflective of your repayment capacity and creditworthiness. A high credit score indicates high repayment capacity. Thus, borrowers with a high credit score are less likely to default on loan repayment than borrowers with a low credit score. To be able to avail yourself of a loan against property on the lowest interest rate, you must have a credit score of at least 750. If your credit score is below 750, it’s best to wait and apply for a loan when your credit score has improved. Repaying your loans and EMIs on time, maintaining a low credit utilization ratio and having a healthy mix of secured and unsecured loans will help you build a strong credit score quickly. 

3. Maintain Job and Income Stability 

Since loans against property involve collateral, many borrowers wrongly assume that an individual’s income and job do not matter when the truth is even when you are applying for a loan against property, your lender will check your income and job stability to understand your repayment capacity and the risk involved for them in doing business with you. A stable income and job minimize the chances of loan default. Therefore, lenders prefer lending money to borrowers who are in stable jobs. If you are planning to apply for a loan against property, do not change your job often.These simple tips will help you avail yourself of a property loan at low interest rates, which in turn, will help you keep your EMIs affordable and the cost of borrowing the loan as low as possible. So, use these tips to your best advantage.