10 Banks Offering the Lowest Interest Rates on Loan Against Property

10 Banks Offering the Lowest Interest Rates on Loan Against Property

A Loan Against Property (LAP) allows property owners to raise funds by pledging residential or commercial property as collateral. Since it is a secured loan, the interest rate is generally lower than that of unsecured borrowing options such as personal loans.


However, the interest rate offered on a LAP is not the same for every borrower. It can depend on factors such as credit score, income, loan amount, property value and type, repayment tenure, borrower profile, and the lender's internal policies.


If you are comparing lenders based on starting interest rates, here are 10 banks that offer relatively competitive rates on Loan Against Property.


Note: Interest rates mentioned below are starting or indicative rates and can change based on lender policies and borrower eligibility. The final rate offered to an applicant may be different.


1. Federal Bank – Starting at 8.20% p.a.


Federal Bank offers Loan Against Property with interest rates starting from 8.20% p.a. onwards. The facility can be used against eligible residential or commercial properties, subject to the bank's lending criteria.


The applicable interest rate can vary depending on factors such as the borrower's credit profile, loan amount, property details and repayment terms. Borrowers should check the prevailing rate and applicable terms at the time of application.


2. State Bank of India – Starting at 10.00% p.a.


State Bank of India offers loans against residential and selected other properties to eligible borrowers. Its LAP offering can be used to meet various financial requirements, subject to the applicable scheme conditions.


The interest rate depends on the specific loan product, borrower profile and prevailing lending rates. SBI's published information indicates rates starting from 10.00% p.a. for its relevant property-backed loan offering.


3. HDFC Bank – Starting at 9.50% p.a.


HDFC Bank offers Loan Against Property and related mortgage products for eligible borrowers. Its published rates for LAP and related facilities vary according to the product and borrower profile.


The bank's current rate range for Loan Against Property and related mortgage products starts at around 9.50% p.a. The actual rate can depend on factors including the loan amount, property, credit profile and repayment structure.


4. ICICI Bank – Starting at 10.60% p.a.


ICICI Bank provides Loan Against Property for individuals looking to raise funds against eligible property. The interest rate varies according to the loan amount, borrower profile and other applicable parameters.


For larger loan amounts, the bank's published rates can start from around 10.60% p.a., while the applicable rate may be higher depending on the borrower's circumstances.


5. Axis Bank – Starting at 9.15% p.a.


Axis Bank offers Loan Against Property through floating-rate loan options. Its published rates differ depending on whether the loan falls under the Priority Sector Lending (PSL) or non-PSL category.


For term loans under the PSL category, the effective interest rate starts at around 9.15% p.a. Non-PSL loans can have a different applicable rate.


The final rate depends on the borrower's eligibility, loan category and other lending parameters.



Read: Why an HFFC Housing Loan Is a Good Option for Home Buyers 


6. Punjab National Bank – Starting at 10.25% p.a.


Punjab National Bank offers loans against immovable property to eligible borrowers. The interest rate is linked to applicable benchmark rates and can vary according to the borrower's credit score and other risk-related factors.


For borrowers with a higher CIC score, the published starting rate for Loan Against Immovable Property is around 10.25% p.a. Borrowers with lower credit scores may receive a higher rate.


7. IDFC FIRST Bank – Starting at 9.00% p.a.


IDFC FIRST Bank offers Loan Against Property for eligible customers. The rate applicable to a borrower depends on factors such as income, credit history, property details, loan amount and repayment terms.


Available rate disclosures indicate that Loan Against Property rates can start from around 9.00% p.a., although the final interest rate offered to a particular borrower can vary considerably.


8. Union Bank of India – Starting at 10.20% p.a.


Union Bank of India offers mortgage-based lending against eligible non-agricultural property.


Its Loan Against Property products are available for various personal and business-related requirements, subject to the applicable scheme conditions.


The interest rate is linked to the bank's applicable benchmark and lending spread. Therefore, the rate can change as benchmark rates and the bank's lending policies change.


Borrowers should check the prevailing rate for the specific Union Bank LAP product they are considering.


9. Kotak Mahindra Bank – Starting at 9.50% p.a.


Kotak Mahindra Bank offers Loan Against Property for eligible residential, commercial and other permitted properties.


The applicable interest rate depends on factors such as loan amount, borrower profile, property value, tenure and purpose of the loan.


The bank has previously published competitive rates for its mortgage products, but the applicable rate can vary by customer and product. Prospective borrowers should confirm the current rate before making a borrowing decision.


10. Bank of Baroda – Starting at 8.90% p.a.


Bank of Baroda provides property-backed financing for eligible borrowers through its mortgage and loan-against-property offerings.


The interest rate can depend on the borrower's credit profile, loan amount, property characteristics and applicable benchmark.


As with other banks, the starting rate should not be considered the rate that every applicant will receive. Borrowers should compare the rate offered to them along with processing fees, tenure and other charges.


How to Compare Loan Against Property Interest Rates


Looking only at the lowest advertised interest rate may not be enough when choosing a Loan Against Property. A better comparison should consider the overall cost of borrowing.


1. Check the Actual Rate Offered


The advertised rate is generally a starting rate. Your final rate may be different based on your credit score, income, existing liabilities, property and loan amount.


2. Compare Floating and Fixed Rates


Most LAP products are offered at floating rates. A floating rate can change during the loan tenure depending on the applicable benchmark and lender's spread. Understand how rate revisions can affect your EMI before choosing a loan.


3. Consider the Loan-to-Value Ratio


The amount you can borrow depends partly on the value and type of property being offered as security. A higher eligible loan amount does not necessarily mean a better loan if it results in higher repayment obligations.


4. Check Processing and Other Charges


Processing fees, legal and technical evaluation charges, documentation costs, insurance requirements and other applicable charges can increase the overall cost of a LAP. These should be considered along with the interest rate.


5. Look at the Repayment Tenure


A longer tenure can reduce the monthly EMI but may increase the total interest paid over the life of the loan. Compare different tenure options before deciding.


6. Consider Prepayment Terms


If you expect to repay the loan early, check the lender's applicable foreclosure and part-prepayment conditions. These can differ based on the borrower category, loan type and purpose.


What Factors Affect the Interest Rate on a Loan Against Property?


Banks generally consider several factors while determining the interest rate offered to a borrower, including:


  1. Credit score and repayment history
  2. Monthly income and financial stability
  3. Employment or business profile
  4. Loan amount
  5. Loan tenure
  6. Property type and market value
  7. Location and legal status of the property
  8. Existing financial obligations
  9. Purpose of borrowing
  10. Applicable benchmark and market conditions

A borrower with a strong credit profile and stable repayment capacity may be in a better position to negotiate or qualify for a competitive interest rate.


Conclusion


Choosing a Loan Against Property should involve more than simply looking for the lowest advertised interest rate.


While a lower rate can help reduce the overall cost of borrowing, factors such as processing fees, loan tenure, loan-to-value ratio, repayment flexibility and prepayment terms can also influence the total cost.


Before applying, borrowers should compare the offers available to them and evaluate the overall cost and terms of the loan rather than selecting a lender based solely on its starting interest rate.