Aditi Ahuja
by on May 10, 2019
Secured by a valuable asset, a loan against property offers you ample funding on simple repayment terms. Loan against property interest rates and the resultant EMIs are generally lower than those provided by other borrowing options. However, bundled with interest charges are fees that go towards processing and maintaining your loan. When combined, these reveal the total cost of taking the loan against property. Read more to learn about the loan against property interest rates and various loan against property charges.

Use an EMI Calculator to Know your Monthly Cost
To know how much you need to set aside for loan EMIs, use a tool like the loan EMI calculator. This will also help you learn how much you will incur at a particular interest rate through the loan tenor. Higher interest rates translate to costlier loans. Consider that you take a loan against property worth Rs.75 lakh for a 180-month tenor at a 9.5% rate of interest. These figures give you EMIs of Rs.78,317 and the total interest as Rs.65,97,025.

If the interest rate is dropped by 0.5% to 9%, your EMIs become Rs.76,070 and the total interest you need to pay at the end of the tenor amounts to Rs.61,92,606. This small interest rate deduction reduces the amount of interest you need to pay by 6.1%. Since interest rates are the major contributing factor to how affordable your loan is, make sure to use an EMI calculator to compare different lenders’ offers.

Choose between a Fixed or Floating Interest rate Loans
When signing up for a loan against property, you have two different interest rate schemes to choose from. With fixed interest rate loans, the rate remains constant throughout the tenor. This means that you can compute the cost of your loan well in advance and plan for repayment accurately. On the other hand, the rate for floating interest rate loans fluctuates with the market.

While floating rates mean that you may have to pay larger EMIs than you expected during some seasons, they also help you profit when the market is favourable. Additionally, as per RBI guidelines, you should be able to make prepayments or foreclose the loan at zero extra fees on floating rate loans. However, you should evaluate your risk profile to know which is the better option for you.

Know the Additional Charges that are Involved
In addition to the interest on a loan for house property there are a variety of fees and charges that come bundled with every loan. Here are some of them:

Processing and Origination Fees: These are initial, one-time and generally non-refundable costs that go towards setting up your loan with your lender. Processing fees tend to range between 1.5% and 2.5%.
Part-prepayment and Foreclosure Fees: Part-prepayment refers to repayments made over and above the regular EMIs and a foreclosure refers to when you want to pay off the entire loan prematurely. Lenders make it easy for you to repay your loan in any of these ways. For example, here foreclosure charges are limited to 4%, prepayments to 2% and in case of floating rate loans taken by individuals, both are slashed to zero.
EMI Bounce and Penal Interest Charge: EMI bounces denote defaults that arise due to reasons such as insufficient funds in your account. Lenders levy a fee when this happens. Similarly, when you default on an EMI you incur a penal interest, sometimes an extra 2% on the outstanding balance.
Incidental, Legal and Miscellaneous Fees: In the course of setting up and maintaining your loan, there are other charges that you will incur. Some will go towards paying stamp duty, others towards legal and repossession procedures. Still others will be termed as incidental, which are unbudgeted charges that your lender incurs on your behalf. Many of these will be charged ‘at actuals’.

Since the entire gamut of loan charges is lender-specific, it’s best to get the fees and charges for a loan against property explained to you by your financier’s representative. You must also make a list of documents required for loan against property to make process simple on your behalf. One loan that comes to you at nominal interest rates and no hidden charges whatsoever is the Loan Against Property. Here you get financing up to Rs.3.5 crore over a flexible tenor of 2 to 20 years.

The convenient Flexi facility allows you to borrow from your sanction in parts, and pay interest only on the amount you utilise. It also eases you into repayment by giving you the option of paying interest-only EMIs for the first few months of the tenor.
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