Loan against property is nothing new, almost every bank now offers this service. But what does this mean? Let’s understand first!
Loans against rented properties (LARP) are secured loans where a borrower uses a rented property as collateral. The rental income from the property helps in the loan approval process. These loans can be used for different needs, like expanding a business, paying for medical expenses, funding education, or buying another property.
For example: Suppose you own a property that you’re renting out, and you need funds to start a new business. You can apply for a loan against your rented property. The bank will consider the rental income from the property when deciding on the loan. You can use the funds from this loan to expand your business, cover medical costs, pay for education, or even purchase another property.
High Loan Amount: Because these loans are backed by property, lenders are more willing to offer larger loan amounts than they would for unsecured loans.
Lower Interest Rates: Secured loans usually have lower interest rates because they are less risky for lenders.
Flexible Repayment Options: Borrowers can pick different repayment periods and plans to match their financial situation.
Retain Ownership: Borrowers keep ownership of the rented property but use its value to get funds for immediate needs.
The applicant must own the rented property and the person should be corporate, landlords or trust who have leased out the properties.
Proof of rental income and other income sources.
750 or above credit score is preferred
Clear and marketable title of the property.
Property should have been approved by the local government.
Typically, applicants should be between 21 and 65 years of age.
A valid and registered rental agreement is necessary.
Both residential and commercial properties can be used as collateral.
Loans secured against rented residential properties are often chosen by people who own several homes and want to use their value for other purposes.
Loans secured against rented commercial properties, like office spaces or retail shops, are often used by business owners or investors who own these types of properties and need to access their value.
Questions that you might have:
You can get in between 1 lakh -10 crore depending on the lender to lender and also your eligibility criteria.
Maximum 10-15 years or not expired period of lease, whichsoever is higher.
It can be 0.50-1%. Depends by lender to lender.
Passphoto, Identity proof, Address proof, Salary slip (last 3 months), Form 16, bank statement (last 6 months)
All property documents and building plan
| For Borrowers | For Lenders |
|---|---|
| Risk of Property Loss: If the borrower defaults, the lender can seize and sell the property. | Property Market Risks: Lenders face risks due to changes in property market values. |
| Fluctuating Property Values: Changes in property market values can impact the loan amount and terms. | Legal and Regulatory Risks: Ensuring compliance with laws and regulations can be challenging. |
| Commitment of Rental Income: Rental income may need to be used for loan repayment, affecting cash flow. | Maintenance of Property: Lenders need to manage property upkeep and handle tenant-related issues. |
Loans against rented properties are a flexible option for property owners, offering them cash while keeping ownership of their assets. By knowing the eligibility requirements, application steps, benefits, and risks, borrowers can make better financial decisions. These loans come with lower interest rates, flexible repayment options, and possible tax benefits. It’s important to research and compare lenders, understand the terms, and seek professional advice to get the best financial results. Using rented properties for loans can lead to significant financial growth and stability.
How can EazyBankLoan help you in taking a loan? We understand the process of procuring a loan can be stressful. That is why we take care of your Loan application process, saving you time and hassle by handling the paperwork and communication with the loan providers.
Check the details here at EazyBankLoan
Need help? Reach out at support@eazybankloan.com
Yes, some lenders may allow multiple properties to be used as collateral to secure a higher loan amount.
The rental income is a consideration but not the sole factor. The loan repayment obligation remains, and you will need to manage repayments through other income sources.
Prepayment penalties depend on the lender’s policies. It’s essential to check the terms and conditions before opting for prepayment.
Yes, Non-Resident Indians (NRIs) can avail of loans against rented properties in India, subject to specific eligibility criteria and documentation requirements.
Lenders conduct a professional valuation of the property considering its location, market value, condition, and rental income.
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