A loan offered by banks keeping the future rent of an owned property as security. This loan can be availed by anyone who owns any kind of property that has been let out on a commercial basis, though banks might have further terms and conditions that would define which customer would actually be eligible for availing the loan.
Loan against Rental Income is a loan that can be used for improving the conditions of the property in question, taking up new projects, repair/renovation or helping out in a business activity. There are virtually no limitations on how the sanctioned loan amount can be utilised. Loan against Rental Income mostly depends on the Tenant from which you are receiving the Rent.Banks generaly categorized Tenants on which basis they usually fund.If the tenant is of A category than it is easily fundable.
Rate of Interest in LRD generally depends on the property being offered and the category to which Tenant belongs. At present it range from 8.75% to 12%.
The following points outline how such a loan is a better choice to opt for –
Approval Time – Since the loan is given based on the security of rent amount coming from an immovable asset, there are lesser verifications to be done and processing happens way more quickly
Interest Rates – Since it is a security-based loan, banks generally offer better and lower interest rates on the loan amount and thus it turns out to be less of a burden financially
Repayment Tenure – Longer repayment periods of up to 10-15 years as compared to 4-5 years in case of conventional personal loans
Loan Amount – The loan amount is based majorly on the market value of the property and thus can facilitate a larger sum of financial help
Collateral Free : Based on the category of Tenant , however some bank also offer collateral free Loan against Rental.