When you require urgent funds to address a pressing financial expense, a Loan Against Property is the ideal solution for you. It is a convenient finance solution that can be availed against a property you own that serves as collateral. Lenders offer sizeable funding based on the property’s valuation at a reasonable interest rate with flexibility on end-usage, which means you can use the funds for housing or business purposes, without incurring high interest on it, as you would on a personal loan.
Before you make your Loan Against Property application, you will have to decide what kind of an interest rate you want on it – fixed or floating, and this decides how expensive the cost of borrowing would be. A fixed interest rate Loan Against Property may make the secured loan safer, but let’s consider its other pros and cons before you make your choice.
Note: Bajaj Housing Finance does not offer Loans Against Property on a fixed interest rate at present.
As the name suggests, a fixed interest rate has no room to fluctuate through the repayment tenor and stays the same till the very end, regardless of current market circumstances. Some lenders also offer variants permitting you to reset your fixed interest rate every few years and give you a chance to readjust your interest rate. This provides a sense of stability and foresight to borrowers, as they can forecast an accurate repayment schedule right at the beginning of their tenor and stick to the schedule without expecting an abrupt change in their EMI payments.
Below is the list of the pros and cons of selecting a Loan Against Property with a fixed interest rate.
Benefits of a Fixed Interest Rate
- No unforeseen interest rate fluctuations can change your EMI configurations
- Insulates your Loan Against Property against market volatility at just a nominal increase in the rate you’re charged
- Makes financial planning easier and helps you stick to your allocated loan budget
Limitations of a Fixed Interest Rate
- The benefit of a lowered interest rate will not be passed on to you
- The fixed rate of interest is always pegged higher, so you may end up shelling out more, as a cost of insulating your loan repayment
A fixed interest rate Loan Against Property only makes sense if you prioritise stringent budget planning over possible savings on your EMIs – thereby protecting your interest rate from any market impact at all. It would be an added benefit if you freeze your fixed interest rate at an opportune moment when the rate offered to you is comparatively lower as well. All things considered, a fixed interest rate Loan Against Property should be availed of only if you’re certain about incurring the same rate of interest across your repayment tenor.
*Terms and conditions apply.
