Tips to Help You Avail Lowest LAP Rate in 2020
Getting a Secured Loan against your property is a very good choice when you need a large amount of money in a very short span of time. As we are preparing to come out of the COVID-19 induced lockdown, now will be the perfect time for people to invest in growing their businesses, start new businesses or work on money plans which have been on hold because of almost the entire world staying at home. Emergence of new opportunities and opening of markets will surely provide many great options for people who want to use Loan Against Property as a way to cater their financial requirements. Below are a few tips that will help you get lowest Loan Against Property Interest Rates in 2020.
Maintain a high credit score: Your credit score is a 3 digit indicator assigned to you by credit reporting bureaus. It shows how good you have been with your previous credit instalments and acts as a measure to test how well will you perform on your continuing and new debts. Credit score is based upon multiple factors including overall credit utilization, regular EMI payments, low credit appetite, among other things. If you have a Credit Score of 800+; you will be the best borrower for any lender. They will easily lend you at the best possible terms and conditions including lowest interest rates. In fact, the Credit Score of a person can impact the interest rates by as much as 1.5 to 2%. When you are dealing in loan amounts of lakhs and crores, you would be delighted at even a half a percent discount in interest rates.
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Seek low Loan-to-Value ratio: Loan Against Property is offered based upon multiple factors related to the property. The actual market value of the property is estimated by the lender. Depending upon factors like the residential or commercial nature of the property, where the property is located, its age and some other factors, the bank will decide how much they can lend. Generally, banks declare that they will offer LAP at certain value only. SBI offers LTV ratio of 65% as long as loan amount being applied for is under 1 crore. For loan applications above 1 crore, the bank offers LTV of 60%. HDFC Bank Loan Against Property is available at LTV ratio of 65%. If you are open to going lower on the loan-to-value ratio, many lenders will be able to offer you good interest rates.
Seek low EMI to NMI ratio: NMI to EMI ratio is a very important factor in all kinds of Property Loans. If you are new to the concept of loans and credit Cards, NMI is the Net Monthly Income a borrower after paying all legal liabilities (like income tax, EMIs etc). Banks and lenders set up a cap on NMI-to-EMI ratio to ensure quality of credit customers. There are important life expenses like food which need to be taken care of. SBI sets up 50% EMI to NMI ratio for people earning between Rs 3 lakhs to 5 lakhs in a year. The ratio is 55% for people earning between 5 lakhs and 10 lakhs yearly. People earning more than 10 lakh every year get 60% EMI to NMI ratio.
Complete property documentation: Loan Against Property in India involves considerable documentation related to property. There will be documentation requirements like Property Map, Property Title Deed, Property Tax Records, Revenue Records, Land Records and Municipal Records, Possession Certificates and Certificate from Fire Control Authorities and Environmental Authorities. Some of these documents like Property Title Deeds and Tax Documents are absolutely necessary and no loan can be granted in their absence. In some cases, lenders may be ready to forego a few of the other documentation requirements, like map, in exchange for a bit higher interest rate. If you have been missing any of the optional documents, you will be well advised to work hard on finding and completing them when you apply for the loan.
Complete documentation, including the optional ones, is a great bargaining chip for any person based upon which they can negotiate favourable interest rates on LAP.
Compare between different lenders: Comparison shopping is a concept as old as the second person who decided to offer their goods and services, thus creating the very concept of a market. The moment consumers saw that they can get the same product from more than one seller, they realize that they can compare between the two and choose the product which is cheaper for them. Loan Against Property is a product with practically zero differentiation. You have the option to ask as many lenders as you can to offer you the best they can do. Once you have some offers in your hand, you can either pick the best among what you have or you can tell other lenders that these are the offers you have received and you are looking to close the deal with anyone who can offer lesser Loan Against Property interest rates.
Wait for special offers: Another great way to look for low interest rate choices on Loan Against Property in India is to wait for special offers. Once we emerge from this whole Corona Virus chaos, banks and lenders will have to work double time to meet their targets. This means a number of special offers on LAP can be expected. These may not start coming immediately because there will be too much of pent up demand for first 2 quarters post the economy reopens, but after that lenders will need to cover some ground before 2020 closes. The final decision would certainly depend on your requirements.
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