All you need to know about loan against rentals

Are you in need of money? If yes, you have the option of availing a loan against rentals. Many lenders operating in the country offer loans against future rentals. The facility of availing a loan against rentals enables you to avail a line of credit on the basis of future rentals of your house property which is let out.

Here, we take a look at all important things that you need to know availing a loan against rentals like who can avail it, properties which are eligible, required documents, security, tenure, interest and charges. Read on to know more about it.

Who can avail of the loan against rentals?

A loan against rentals can be availed by any person, who is the owner of a commercial or residential property. The property can be owned either individually or jointly. To avail the line of credit, properties must be already be let out or a lease agreement has been entered into.

Which type of properties are eligible?

The loan can be availed for a commercial property which has been let-out or leased to a reputed lessee or a residential house provided there is an agreement for a period that covers the repayment tenure of the loan.

Documents which needs to submitted

When looking to avail the loan against rentals, you will be required to submit certain documents. Listed below are the documents which the bank might ask for:

  • Duly filled application form
  • Identity proof
  • Address proof
  • Proof of repayment capacity
  • Form 16 or Income tax returns (For Salaried individuals)
  • Audited accounts or ITR for last 2 – 3 years (self – employed individuals)

Security

In order to secure the loan on the property, you need to pay a charge. In case, you have already availed a home loan, you can offer any other property as security for the loan. However, you must ensure that the margin requirements of the lender are fulfilled. It must be noted here that the existing bank may consider the rental loan favourably if the value of the property appreciates substantially after the initial home loan was disbursed.

Repayment tenure

The loan availed against rentals can be repaid within a period of 10 years. However, the tenure of the loan cannot exceed the residual period of the lease agreement.

Interest and Charges

Lenders which offer a loan against rentals normally charge a processing fee of up to 1% of the loan amount. As for the interest, it varies from bank to bank and depends on the profile of the borrower. Banks offer a loan against rentals at an interest which ranges between 10% p.a. and 13% p.a.

Availing a loan against rental can come in handy when in need of money. With the rate of interest and processing fee being low and the repayment period being a decent one, it is a good option. So, if you have a property to let out and is in need to hard cash you can get it touch with the appropriate lender. Before approaching a lender ensure that your credit history is good as it would make the approval process a smooth one.

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