One of the not so popular yet useful sources of credit that have been there for several decades is a loan against property (LAP). Property owners have the advantage of an extra loan facility wherein they can fetch loans against their residential, industrial or commercial property, or even plots. And the best part is that LAP enables the property owner to leverage this immovable asset to get the required loan amount without losing the ownership of the asset, i.e. property.
Moreover, the secured nature of LAP is what further allows lenders to offer relatively lower ICICI loan against property interest rates along with longer tenures of up to 15 years-20 years to repay through smaller EMIs. Hence, if you too are a property or plot owner in need of funds, irrespective of the end usage, personal or business use, it’s best to adopt these tips that can be your gateway to high approval chances for ICICI loan against property.
First check offer with existing bank/HFC
For striking the best deal with a low-interest rate as per your LAP eligibility, it is always advisable to check both the product features and offers provided by banks and HFCs with whom you have an existing customer relationship, like savings or current account, fixed/recurring deposit accounts, existing loans and/credit cards.
This is vital because many lenders offer preferential terms, lower ICICI loan against property interest rates, etc., to their existing customers, since they already have the repayment history, KYC and other relevant information of that customer which is required for lending.
Put your thinking hat on when selecting LAP loan tenure
A vital decision in LAP application that is often not emphasized when you get to qualify for a lower ICICI loan against property interest rate is of selecting the right tenure as per your repayment capacity, which includes aspects like your income, other EMIs, expenses etc. As the loan’s repayment tenure is generally up to 15-20 years and varies for different lenders, remember that choice of tenure plays a vital role in determining the EMI outgo as well as total loan cost. Go ahead with the tenure which suits your repayment capacity and whose corresponding EMI is most comfortable to repay every month without stressing your finances too much. Choosing a longer repayment tenure leads to lower EMIs, but it also results in higher overall interest costs.
On the flip side, shorter repayment tenure involves bigger EMIs, but overall lower interest outgo. If one goes for shorter tenure, an aggressive repayment schedule may harm financial health due to the high EMI amount outgo. Thus, go ahead with long repayment tenure to get the benefit of smaller EMIs for ICICI loan against property, and later make prepayments whenever you have surplus money in order to reduce overall interest cost.
Compare interest rates with maximum possible lenders.
As LAP is a secure natured product, it gives lenders the right to recover outstanding loan amounts from the auction of pledged property in case of loan default. It is the presence of this secured nature of ICICI loan against property that often leads to lower interest rates for borrowers, thanks to lower risk involved for lenders, vis-a-vis unsecured options like personal loans.
But, ensure to not forget that the rate would also depend on the lender’s credit risk assessment of the borrower’s credit profile, repayment capacity and pledged property’s characteristics like location, type and age of the property, etc. The ICICI loan against property interest rate may also vary depending on the loan amount and repayment tenure chosen by the applicant. When deciding to take LAP, make sure to thoroughly compare the rates and other factors like tenure, LTV ratio, amount, processing fees etc., of as many lenders as possible before moving forward, as this enables you to strike the best deal with the most suitable lender.
Successfully qualify for lender’s eligibility criterion.
Applicants who are successful in qualifying for an ICICI loan against property through satisfactory criteria like minimum income, age, credit score, repayment history and capacity, etc., usually have higher chances of availing lucrative interest rates v/s those who face difficulty in qualifying for such eligibility criterion.
For instance, many lenders tend to offer lower interest rates to borrowers who have high income, low LTV ratio requirement, good credit score and live in a metro location. Since those fulfilling all such criteria of eligibility for the lender tend to be looked at as more favourable according to the set credit risk assessment parameters, prospective applications aimed towards fetching ICICI loan against property interest rate should also scout and opt for the loan offer and lender whose eligibility criteria are satisfied to the maximum extent.
Possess a strong credit score
Over the years, credit score’s role and importance in both the approval and setting of lending rates has gained lots of prominences, even for loans against property. Lenders are even increasingly factoring in applicants’ credit scores when evaluating loans against property eligibility. In fact, some have even begun risk-based pricing, wherein lower ICICI loan against property interest rates are offered to those having a good credit score, whereas those with a low credit score are offered relatively higher interest rates, or their application may even get rejected. So, it becomes prudent for all prospective loan applicants to ensure to build and maintain a high credit score in order to enhance their eligibility when availing the required funds by applying for an ICICI loan against property.
Finalize a lower LTV ratio
During the process of finalizing your loan against property as per the eligibility criterion of lenders, remember it this loan, being secured in nature, usually involves LTV of up to 50%-75% of the property’s cost. From a credit risk and eligibility point of view, the higher the LTV ratio chosen, the higher the loan amount and EMI, hence higher the risk involved in big-ticket loans.
More often than not, lenders can decide to tread cautiously when offering a relatively high LTV ratio to applicants, as it would imply higher risk due to higher loan amounts. Some lenders like ICICI loan against property offer lower interest rates in the form of attractive ICICI loan against property interest rates to those opting for lower LTV ratio, hence making it a prudent move for prospective borrowers to select a lower LTV ratio if possible. You should move ahead only with the LTV ratio, whose corresponding loan amount is enough to satisfy the fund requirement. Desist from opting for an unnecessarily higher LTV ratio if not required, as higher the loan amount due to higher LTV ratio, higher the total LAP interest cost as well.