Estimated reading time: 5 minutes
If you’re a homeowner looking to benefit from the value of your property for financial needs, a Loan Against Property (LAP) can be an excellent option. However, with several banks and financial institutions offering varying interest rates, finding the best LAP interest rate is crucial to ensure affordable repayment.
In this blog, we’ll break down LAP interest rates, the factors affecting them, and tips on how to choose the best offer.
What is a Loan Against Property?
A Loan Against Property (LAP) is a secured loan where you pledge your residential or commercial property to avail funds. The loan amount is typically a percentage (usually 50%-80%) of the property’s current market value.
This loan can be used for various purposes like education, business expansion, or personal expenses. The best part about LAP is its relatively lower interest rates compared to unsecured loans like personal loans, making it an appealing option for those with property assets.
Loan Against Property (LAP) Interest Rates in India
LAP interest rates in India can vary significantly between lenders based on multiple factors such as your credit score, loan tenure, and the value of the property. Below is a table comparing LAP interest rates from some of the top lenders in 2024:
| Lender’s Name | Interest Rate Range (p.a.) | Maximum Tenure (Years) |
|---|---|---|
| IDFC First Bank | 9.00% – 20.00% | 25 |
| Fullerton India | 9.00% – 24.00% | 15 |
| YES Bank | 8.85% | 15 |
| IndusInd Bank | 8.75% – 14.58% | 20 |
| HDFC Bank | 9.50% – 11.00% | 15 |
| Axis Bank | 10.50% – 10.95% | 20 |
| ICICI Bank | 10.85% – 12.50% | 15 |
| State Bank of India | 10.10% – 11.65% | 15 |
| Kotak Mahindra Bank | 9.50% – 10.50% | 15 |
| PNB Housing | 9.24% – 12.45% | 20 |
| Bajaj Finserv | 9.00% – 14.00% | 15 |
| TATA Capital | 10.10% | 20 |
| Sammaan Capital | Starting at 9.75% | 15 |
| Bajaj Housing Finance | Starting at 9.75% | 17 |
| HSBC Bank | 9.75% | 15 |
| Standard Chartered Bank | 9.65% – 10.05% | 20 |
| Bank of India | 10.10% | 15 |
| Central Bank of India | 9.75% – 13.00% | 10 |
| Union Bank of India | 10.60% – 13.15% | 15 |
| Federal Bank | 11.15% – 14.80% | 10 |
Note: The interest rates and processing fees are indicative and subject to change as per lender policies.
Factors Affecting Loan Against Property Interest Rates
The interest rates for LAP are influenced by several factors. Here’s a closer look at the major determinants:
1. Credit Score:
A higher credit score typically 700 and above results in lower interest rates, as it reflects better creditworthiness.
2. Property Type and Value:
Residential properties in prime locations often secure lower interest rates compared to commercial properties. The property’s market value also plays a crucial role.
3. Loan-to-Value (LTV) Ratio:
A lower LTV ratio may lead to more favourable interest rates. Most lenders offer up to 70% of the property value as the loan amount.
4. Income and Employment Status:
Stable income and employment can help secure better interest rates.
5. Loan Amount and Tenure:
Larger loan amounts and shorter tenures may attract lower interest rates in some cases.
6. Relationship with the Lender:
Existing customers with a good relationship with the bank might be offered preferential rates.
7. Market Conditions:
Prevailing economic conditions and RBI policies can affect overall interest rate trends.
How to Choose the Best LAP Interest Rate
Here are a few tips to help you choose the best LAP interest rate:
1. Compare Multiple Lenders:
Don’t settle for the first offer. Compare rates from various banks and NBFCs to find the best deal.
2. Improve Your Credit Score:
Work on enhancing your credit score before applying for a LAP to qualify for lower interest rates.
3. Negotiate:
Don’t hesitate to negotiate with lenders, especially if you have a strong financial profile or are an existing customer.
4. Consider Fixed vs. Floating Rates:
Evaluate whether a fixed or floating interest rate suits your financial situation better.
5. Check for Hidden Charges:
Look beyond the interest rate and consider processing fees, prepayment penalties, and other charges.
6. Opt for a Shorter Tenure:
If possible, choose a shorter repayment period to potentially secure a lower interest rate.
7. Include a Co-applicant:
Adding a co-applicant with a strong financial profile can help in getting better interest rates.
Conclusion
In conclusion, a Loan Against Property (LAP) offers a viable way to access large sums of money by leveraging your property. However, it’s essential to compare interest rates across lenders and evaluate the other fees and terms associated with the loan.
At Credit Dharma, we simplify your search for the best LAP interest rates. Contact us now to start your journey toward affordable and hassle-free financing.
Frequently Asked Questions
While you retain ownership, the property is mortgaged to the lender. You can’t sell or transfer the property without the lender’s consent until the loan is fully repaid.
Yes, this is known as a balance transfer. Many banks offer attractive rates for LAP balance transfers. However, consider all associated costs before making the switch.
While both use property as collateral, home loans are specifically for purchasing or constructing a home. LAPs can be used for various purposes and often have different interest rates and terms.
Generally, a lower LTV ratio (meaning you’re borrowing less against your property’s value) can lead to better interest rates, as it represents a lower risk for the lender.
Lenders offer both fixed and floating interest rate options for LAP. Fixed rates remain constant throughout the loan tenure while floating rates fluctuate based on market conditions.
HDFC Home Loan
SBI Home Loan
