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What is the impact of taking a loan against property on my EMI amount?

Curious about EMIs

What is the impact of taking a loan against property on my EMI amount?

Taking a loan against property (LAP) can have several impacts on your Equated Monthly Installment (EMI) amount, depending on various factors. Here's how a LAP can affect your EMI:

1. Loan Amount: The principal amount you borrow against your property will significantly impact your EMI. A higher loan amount will result in higher EMIs, while a lower loan amount will lead to lower EMIs.

2. Interest Rate: The interest rate offered by the lender is a crucial factor. Typically, LAP interest rates are lower compared to unsecured loans but higher than home loan rates. A lower interest rate will result in lower EMIs, while a higher rate will lead to higher EMIs.

3. Loan Tenure: The tenure of your LAP can be longer than most unsecured loans. A longer tenure will spread the repayment over more months, resulting in lower EMIs. However, a longer tenure also means you'll pay more interest over the life of the loan.

4. LoantoValue (LTV) Ratio: The LTV ratio is the percentage of your property's value that the lender is willing to offer as a loan. A higher LTV ratio can result in a higher loan amount and, consequently, higher EMIs.

5. Property Value: The current market value of your property is a crucial factor. If your property's value is substantial, you may be eligible for a higher loan amount, affecting your EMI.

6. Credit Score: Your creditworthiness plays a role in determining the interest rate offered by the lender. A higher credit score can lead to a lower interest rate, reducing your EMI burden.

7. Fixed or Floating Interest Rate: You can choose between a fixed or floating interest rate for your LAP. A fixed rate provides stability in EMIs, while a floating rate can change with market conditions.

8. Prepayment and PartPayment: Some lenders may allow you to make prepayments or partpayments towards your LAP. These payments can reduce the outstanding principal, leading to lower EMIs if you continue with the same loan tenure.

9. Other Charges: Be aware of any processing fees, administrative charges, and other costs associated with taking a LAP. These can add to the overall cost of the loan and affect your monthly budget.

It's essential to use an EMI calculator provided by the lender or available online to estimate your EMI accurately based on your specific loan amount, interest rate, and tenure. This will help you plan your finances and ensure that the LAP is affordable for you.

Additionally, before taking a LAP, carefully assess your financial situation and repayment capacity to ensure that you can comfortably manage the EMI payments without straining your finances.

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