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Everything You Need to Know About Commercial Property Loan 

A Commercial Property Loan helps finance commercial real estate; the interest rates are also flexible. This type of property loan is taken for business properties only. Various commercial properties come under this type of loan, such as office buildings, retail spaces or warehouses.

Learn more about Commercial Property Loans and the applicable Commercial Property Loan interest rates in detail. 

How Commercial Property Loans Work?

A Commercial Property Loan works much like any other type of secured loan. You borrow a specific amount from a lender and pay it back over a set period with interest. The amount you borrow and the interest rate you are charged with are based on the value of the property, your credit history and your ability to repay the loan. 

Getting a Commercial Property Loan starts with finding the right lender and submitting an application. The lender will use your provided information, such as income proof and credit record to determine your loan amount and interest rate. 

Factors that Affect Commercial Property Loan Interest Rates

Commercial Property Loan interest rates vary significantly from lender to lender and are influenced by several factors. 

  • The borrower’s creditworthiness: Lower interest rates are provided to borrowers with a strong credit history and sound financial standing.
  • The loan-to-value ratio: The loan-to-value ratio is the loan amount compared to the property’s value. The higher the loan-to-value percentage, the higher the interest rate will be. 
  • The type of property: Some properties, such as apartments or retail spaces, are considered less risky than others, such as office buildings. So low-risk properties are more likely to receive lower interest rates.
  • The length of the loan term: The longer the loan term, the higher the interest payout will be. 

Documents Needed for a Commercial Property Loan

To apply for a Commercial Property Loan, you need to submit a few documents –

  • Identity proof, PAN Card, Passport, Aadhaar Card, Driving Licence 
  • Certificate & Proof of business – If you have an existence in the market and have been in the industry for a long time, your Business Profile would be considered during the loan approval. The lending institutions take this factor to estimate the business position. You can provide a profit and loss statement to give them an idea of your financial standing.
  • Last three years’ Income Tax returns duly certified or audited by a Chartered Accountant
  • Last 12 months Account Statements (for self & business)
  • Copy of property title document and approved plan 

Benefits of a Commercial Property Loan

  • Higher loan amount: Based on your commercial properties, lending institutions provide you a loan limit.
  • Lower interest rates: The interest rates for property loans are usually less due to their secured nature.
  • Shorter EMI:  The EMI amount can be adjusted according to the budget as per your financial goals, so it won’t be a hassle for you with a repayment period of 15 years.
  • Tax benefits: Under Section 24(b) interest payments on these loan EMIs save you a significant amount.
  • Increasing Property Value: Investing in a commercial property increases your net worth as the real estate market is always a profitable bet.

To Wrap Up

A Commercial Property Loan is a great option for those who wish to purchase or refinance a commercial property. However, it is essential to understand how these loans work, what factors affect interest rates, and the types of Commercial Property Loans available.

With the right lender, favourable terms, and a solid financial plan, a Commercial Property Loan can help you achieve your goals and secure a profitable future!

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