A need for money can arise anytime. Hence, people prefer hiring a tenant to earn additional income from their property. But, sometimes, the situation gets worse and thus you look for loan options. So, today we will let you know about how to avail a loan against the rental income. Scroll the page down and read about the concept, features and ways to apply for a loan against rental income.
1. Concept of Loan against Rental
This kind of financial assistance is offered by the banks and other financing institutions against the future rental income. The borrower easily avails the credit duration for repaying of this loan against rental on the basis of the amount he/she is going to earn in future as rent.
2. Eligibility for Availing Loan against Rental
A person owning any residential or commercial property is eligible for availing a loan against rental income. A person is counted as a single applicant in case he/she is the sole owner of a property. But, the joint property owners won’t fall under this rule. As, these owners are required to apply for the loan against rental income jointly.
3. Eligible Properties to Avail Loan against Rental
Firstly, you can apply for this loan on the basis of a residential property which you listed to let-out. Make sure to render an agreement for a particular time period which covers the repayment of the loan against rentals. The banks ask for a registered lease or rental agreement before approving the application for a loan against rental income.
Secondly, a person can apply for a loan against rental income in case of owning a commercial property that he/she is planning to sell. The person is also required to produce the copy of a registered lease/rent agreement as the banks/financial institutions won’t approve a loan in the absence of this document.
4. Rate of Interest and Other Charges
The lender such as a bank/financial institution charges a processing fee of 1 percent on the loan amount. Whereas, the ROI that is a rate of interest varies as this percentage depends on borrower’s financial profile and the policies of bank/financial institutions.
Currently, the rate of interest is 10 and 13 percent respectively. The tenure for the repayment of loan against rental is 10 years and also note that the repayment period can’t exceed more than that of the lease/rent agreement that you have produced while applying for this loan.
5. Security for Loan against Rental
The approved loan against rental is secured by the bank/financial institutions via levying a charge on the property that is rented or leased. Those having an ongoing home loan are not eligible for a loan against rental income. This is because the lenders will never put the second charge on the future/advance money.
However, an application for a loan against rental can be made by producing papers/document of any other property owned by you.
6. List of Documents Required for Availing of Loan against Rental:
Form16/ Income Tac Return for Salaried People
Account Audit Report for Self-Employed People
Income Tax return for 2/3 Years for Self-Employed People
7. Usage of Loan against Rental:
This loan can be used as per your requirements such as:
Buying a Home
Renovation of a Home
Education of your Children
*This loan can be only availed by the property owners who are earning rental income and have listed their property to-let.