What Can You Negotiate While Availing A Loan Against Property?

A loan against property is believed to be a more affordable loan compared to personal loans. The reason is that unlike a personal loan, this type of loan is secured. A borrower is required to provide his house or property owned as security to the bank against the loan amount provided. These types of loans are usually used as seed money to start a new business, funding for a child’s education abroad or used to fund a holiday trip. Even though a loan against property is believed to be more affordable, there are a few steps one can take as a borrower to reduce the financial strain.

1. Negotiate the interest rate

If you have a strong credit history and a steady source of income you may be able to negotiate with the bank to reduce the loan against property interest rate charged. The bank is usually more willing to lessen the interest rate charged if you are able to provide documented proof that you will be able to consistently repay the EMIs every month without fail. You can also opt for a floating interest rate as compared to a fixed interest rate on your loan. A floating interest rate will provide you with opportunity to avail the benefit of a low interest rate.

2. Negotiate the fees and charges

When you apply for a loan against property you are required to pay a processing fee which is usually 0.5 to 3 percent of the total loan amount issued. There are also charges that you can nullify if you try to negotiate with the bank. Most financial lenders are will be willing to reduce these amounts charged just to sign you up for the loan. In other cases you need to provide a convincing reason which can force the bank to cancel these charges and fees.

3. Negotiate the value of the property

Most financial institutions will only provide you with between 40 and 70 percent of the actual worth of the property. With the help of a strong credit report you may able to convince the bank to increase the loan amount provided. One of the main concerns that most financial institutions have is that the borrowers may not be able to repay the loan or is not consistent in repaying off his EMIs. Hence if you are able to prove to the bank that you are a reliable borrower, you may get certain advantages.

Always try to negotiate with your bank for a lower loan against interest property rate. If the bank agrees, this will reduce the financial burden you experience for the tenure of the loan.