Commercial property loans could mean two things. Loans availed of to finance the purchase of commercial property are known as commercial property loans. At the same time, loans secured by pledging a commercial property one owns are also known as Commercial property loans. Both these loans fall under the larger bracket of secured loans and their USP is low commercial property loan interest rates.
This article further discusses what loan applicants can do to secure a low commercial property loan interest rate so that loan EMIs remain manageable and easy to pay.
Commercial Property Loans: Tips on How to Secure a Low-Interest Rate Deal
Opt for a Low LTV Ratio Loan: When it comes to secured loans, such as a commercial property loan, borrowers can only borrow a portion of the pledged collateral’s current market value. The LTV ratio is the ratio of the loan amount secured as a loan to the total value of the property pledged as security. A high LTV ratio increases the risk for the lender. Consequently, high LTV ratio loans compel lenders to ask for higher commercial property loan interest rates. To secure a low-interest-rate commercial property loan, keep the LTV ratio low. This will also help keep EMIs manageable and easy to repay.
Maintain a CIBIL Score above 750: The CIBIL score is the credit rating assigned to loan borrowers and credit users by TransUnion CIBIL, the oldest and most popular credit information agency in India. The CIBIL score vouches for the loan applicant’s repayment capacity and creditworthiness. A high CIBIL score indicates excellent repayment capacity and very low chances of a loan default. Loan applicants must make sure that if they are planning to apply for a commercial property loan, their CIBIL score is at least 750 or above. Such a CIBIL rating allows loan applicants to negotiate for a profitable loan deal, including a high loan sanction and a low commercial property loan interest rate.
Maintain a Stable Income and Job: People with stable incomes and jobs very rarely miss loan EMIs or default on loan repayment. These people can be trusted with timely repayment of loan EMIs and therefore, most lenders show a high willingness to have such people onboard on clients. One of how lenders entice such borrowers is by extending loans to them at low interest rates.
Pledge a High-Value Collateral: Whether you are securing a loan to purchase a commercial property or availing of a loan against property, the quality of the collateral is important and will play a determining role in helping lenders decide the commercial property loan interest to be offered to you. Pledging high-quality collateral with high resale value will certainly help you secure low interest rates and pay off the loan easily.
The external market conditions also play an important role in ascertaining the interest rate that borrowers are able to secure. However, borrowers have no control over these external rates. The best thing that a borrower can do is apply for a commercial property loan when the external market rates are low.
Commercial Loan Application Process
If you need a commercial property loan, here’s what the process entails:
- Research lenders and decide the lender you wish to apply to. This decision must be made after comparing the loan amount being sanctioned, the commercial property interest rate being charged as well as other additional fees involved.
- After you have decided on the lender, go to their website and access the online commercial property loan application form. Fill out the form properly. You can even apply for a loan offline by visiting a branch of your preferred lender.
- Submit all the documents requested and wait for the document and property verification to complete. This step of the process takes the longest and is the most important.
- Negotiate the loan terms and conditions. Be as thorough as you can and discuss every term and condition in great detail. Hire a legal expert if you need to.
- Sign the final offer letter and wait for the loan amount to be disbursed into your account.
Commercial property loans also have some eligibility requirements. Before initiating the loan application, make sure you meet the qualifying criteria.
