Breaking Down the Concept of Lease Rental Discounting
Lease Rental Discounting is a tool to acquire loans from banks using rental receipts as collateral. The bank will examine long-term cashflow and provide the loan based on the exact amount. This loan is then payable by the rents promised.
Factors Considered by the Bank When Providing Loan
To check your eligibility for Lease Rental Discounting, the bank will assess several factors which include:
Value of your property
Your capacity to repay
Other assets you own
Legality and technical aspects of your property
Liabilities that might occur
How Does LRD Work?
Lease Rental Discounting (LRD) loans work on the premise of rental properties being owed a fixed amount of rent. Tenants enter into a lease with the owner of the property. This agreement mandates a regular payment which is known as rent. The property owner can use rental receipts drawn up for the duration of the lease as collateral while applying for a loan.
The process is streamlined as rent is transferred directly to the bank as EMI instead of going to the owner. Each bank has its own criteria as far as the amount of the loan against property is concerned. But, on an average one can get up to 70% of the property valuation in loan amount.
The Benefits of Opting for Lease Rental Discounting
Business Expansion: The property owner can further invest in property using the loan acquired from LRD.
Tax Benefits: Tax deductions can be availed by owning more property.
Balanced Cash Outflow: The borrower will benefit from a balanced cash flow as EMIs are taken care of using the rent money owed by tenants. The money acquired in loan provides further revenue through investments.
Low Capital Expenditure: The capital gained from the bank loan greatly helps in reducing personal expenditure when investing in more properties or businesses.
Are You Eligible for Lease Rental Discounting?
Salaried individuals, professionals with an established practice, and self-employed individuals qualify for LRD. In case of non-individual entities, any partnership firm, private and public limited enterprises as well as proprietorship firms are eligible.
With renting property being the safest bet in the infrastructure investment business, Lease Rental Discounting is effective to expand a growing business. This can be ensured while keeping personal capital investment low. It is a balanced tool for individuals and companies looking to diversify their investments without putting in a large sum of investment.
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