A loan against property is a viable means to raise large funds by mortgaging one's real estate. Of course, borrowers' biggest fear is the interest rates on loan against property. These rates will directly impact the loan's cost. If you want to reduce the LAP interest rate, here are 6 effective tips to do it.
Improve Your Credit Score
The credit score helps the lenders to determine your creditworthiness. So, what should they do if they are looking for ways to improve their credit scores? Make sure you pay bills and EMIs on time. This way, you will have a better credit score.
Opt for a Shorter Loan Tenure
A longer loan means lower EMIs. But, a housing loan mostly attracts higher interest. Choosing shorter tenures can reduce the financing cost of your investment. Banks feel that over time, there is less risk of default, unlike long-term loans. Moreover, the borrower pays less interest over time. Review your financial condition and decide on the shortest term you can afford.
Leverage Your Existing Relationship with the Lender
If you have a long-term relationship with your bank or lender, then use it to your advantage. Banks often offer better interest rates to their long-time customers. Talk about your history with the bank. Negotiate for a better rate based on your accounts, loans, or other products you have with them.
Consider a Balance Transfer
If your present lender is offering you a bad rate, switch to another lender. They offer a better deal. Many banks and financial institutions offer low interest rates. They do this to attract new customers via balance transfer. However, consider any transfer fees or charges. Ensure the move is financially viable.
Keep Regularly Monitoring Interest Rates
The interest rates fluctuate based on various factors in the economy. Keeping informed about the current market conditions. You can refinance your loan at a better time when the rates are lower. Keep tabs on financial news. Meet with advisors and use online tools to track interest rates.
Choose the Right Type of Interest Rate
Lenders provide borrowers with two types of rates’ fixed and floating. While fixed rates remain constant for the life of a loan, floating rates vary based on market conditions. In a falling interest rate scenario, for example, it would be better to have a floating rate.
Final Words!
It is strategic to adjust the interest rates on your property loan. This is a good idea because you are likely to get more out of it. To illustrate, consider adding some installment debts so that your credit mix can grow stronger. In addition, keep a check on how much you use your credit cards.
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